http://www.engineeringnews.co.za
  SEARCH
Login
R/€ = 13.83Change: -0.12
R/$ = 11.04Change: -0.17
Au 1172.85 $/ozChange: 3.68
Pt 1231.00 $/ozChange: -0.50
 
 
Note: Search is limited to the most recent 250 articles. Set date range to access earlier articles.
Where? With... When?








Start
 
End
 
 
And must exclude these words...
Close Main Search
Close Main Login
My Profile News Alerts Newsletters Logout Close Main Profile
 
Agriculture   Automotive   Chemicals   Competition Policy   Construction   Defence   Economy   Electricity   Energy   Environment   ICT   Metals   Mining   Science and Technology   Services   Trade   Transport & Logistics   Water  
What's On Press Office Tenders Suppliers Directory Research Jobs Announcements Contact Us
 
 
 
RSS Feed
Article   Comments   Other News   Research   Magazine  
 
 
Dec 06, 2010

Gigaba signals yet more taxpayer support for State firms

Back
Newly appointed Public Enterprises Minister Malusi Gigaba speaks about government's plans for State-owned enterprises. Camerawork: Nicholas Boyd, Editing: Darlene Creamer.
DURBAN|Engineering|Port|Africa|Business Unity South Africa|Eskom|Pebble Bed Modular Reactor Company|PROJECT|Public Enterprises|Transnet|Africa|South Africa|Manufacturing|Manufacturing Sector|Anton Eberhard|Ebrahim Patel|Infrastructure|Jacob Zuma|Malusi Gigaba|Mangwashi Piyega|Power|Rail|Raymond Parsons|The Presidential Review
Engineering|Port|Africa|Eskom|PROJECT|Transnet|Africa||Manufacturing||Infrastructure|Power|Rail||
durban|engineering|port|africa-company|business-unity-south-africa|eskom|pebble-bed-modular-reactor-company|project|public-enterprises|transnet|africa|south-africa|manufacturing|manufacturing-sector|anton-eberhard|ebrahim-patel|infrastructure|jacob-zuma|malusi-gigaba|mangwashi-piyega|power|rail|raymond-parsons|the-presidential-review
© Reuse this



South Africa’s newly appointed Public Enterprises Minister Malusi Gigaba has signalled that government was likely to have to make further direct investments, loans and guarantees into State-owned enterprises (SoEs) in order to ensure that the infrastructure investments needed to double the rate of economic growth are made.

As an “activist State”, government perceived the role of SoEs in dealing with the prevailing infrastructure backlogs as critical to addressing the urgent challenges of poverty and massive joblessness.

Speaking at a seminar hosted by the Presidential review committee (PRC) into SoEs, Gigaba also indicated that he and his department were preparing to play a far more hands-on role in guiding the governance of the country’s key SoE’s, many of which are considered to be underperforming against their mandates.

Last week, Business Unity South Africa (Busa) voiced its concerns around the underperformance of public enterprises and noted that increased use could be made of public private partnerships (PPPs). Currently, South Africa only makes use of about 3% to 4% of such partnerships, but Busa deputy CEO professor Raymond Parsons said that this could be increased to around 25%.

There is also general public disquiet about the quality of leadership and many of these corporations, as well as at the level of executive remuneration.

However, Gigaba promised guidance on project funding structures, on executive remuneration governance structures, as well as on the recruitment, appointment and performance of board members.

He also said that he would be probing the accounting and general reporting framework for SOEs, their relationships with relevant policy departments, dividend policies and whether the SOEs need to be governed by a different statute other than the Companies Act.

The ambitious infrastructure investment programme, he argued, was a powerful instrument at government’s disposal. In fact, Gigaba told Engineering News Online that he expected investment to increase in coming years, as reaffirmed in the recently released New Growth Path.

The document, which was released by Economic Development Minister Ebrahim Patel in late November, called on government for continued and increased investment to create and develop infrastructure and to decrease the cost of doing business in the country, while stimulating the manufacturing sector, developing skills and, ultimately, creating jobs.

The South African government had also previously committed itself to spending some R800-billion on infrastructure in the next three years, of which about 40% had already been allocated to one of South Africa’s biggest SoEs, Eskom.

Gigaba lamented the decline in public sector investment over the past three decade, noting that, between 1976 and 1994, public investment in infrastructure dropped from 16% of gross domestic product (GDP) to about 4% to 5%, mainly owing to a shift towards the privatisation of these entities.

Even after 1994, investment by the SoEs into infrastructure remained low at around 5% between 1994 to 2004, when State-owned power utility Eskom and rail parastatal Transnet announced their investment plans.

This reduced spending led to a significant “funding gap”. “Had we consistently been investing in infrastructure at about 10% of GDP between 1994 and 2010, we would have invested an additional R1,5-trillion in today’s currency, which would have had a major impact on job creation and rescued million of South Africans from poverty and their reliance on social grants.”

This year, government has managed to up public investment in SOEs to about 9% of GDP.

But the poor performance of many SoEs remains a concern and also led President Jacob Zuma to establish the PRC in May, which has been appointed to review and propose ways of strengthening the enterprises.

Currently, it is estimated that South Africa has about 300 SoEs, nine of which fall under the DPE. In recent years, two of its larger enterprises, including Eskom, were bailed out, while another, the Pebble Bed Modular Reactor Company, was closed down.

The entities had also been struggling with transparency issues, appointing qualified and suitable board members, and determining and distinguishing the different roles of government when it comes to SOEs.

Also speaking at the seminar, National Planning Commission member professor Anton Eberhard pointed out that the country’s SOEs were often known for their underperformance, while also being more expensive than their competitors. “It has been shown that while access to Durban’s port is only half that of its competitors, rates are three times that of its competitors. South Africa is also significantly more expensive than any of its international competitors in the information communication and technology sector.”

He noted that it was important for the new PRC to consider such facts and to identify reforms that would speak to such realities and would be able to change the political economy of SoEs.

Meanwhile, the PRC chairperson Mangwashi Piyega assured that the committee was considering all the different challenges of SoEs in South Africa and noted that it would submit its reform recommendations to the President at the end of September 2011.

“The review by the PRC seeks to define the SOEs and their role in the developmental State, while investigating the state of SOEs in relation to the objectives of government, looking at governance and ownership, business viability, and strategic management and operational effectiveness,” she concluded.
 

Edited by: Terence Creamer
© Reuse this Comment Guidelines (150 word limit)
 
 
 
 
 
 
 
 
 
Latest News
The retail price of 95-grade petrol in South Africa will drop by 45 cents or 3.3 percent a liter from next Wednesday, while wholesale diesel will decrease by 4.9 percent, the government said on Friday. Petrol will cost 13.16 rand ($1.20) a liter while the wholesale...
Special purpose vehicle GreenCape will, by the end of 2014, make an application to the Department of Trade and Industry (DTI), the Western Cape provincial government and the City of Cape Town to declare Atlantis, on the Western seaboard, a special economic zone...
The German government has committed a further R70-million towards the second phase of the Non-Motorised Transport (NMT) programme. The NMT programme forms part of the Department of Environmental Affairs’ 2010 FIFA World Cup National Greening Legacy Programme.
More
 
 
Recent Research Reports
Defence 2014: A review of South Africa's defence industry (PDF Report)
Creamer Media’s Defence 2014 report examines South Africa’s defence industry, with particular focus on the key participants in the sector, the innovations that have come out of the sector, local and export demand, South Africa’s controversial multibillion-rand...
Road and Rail 2014: A review of South Africa's road and rail infrastructure (PDF report)
Creamer Media’s Road and Rail 2014 report examines South Africa’s road and rail transport system, with particular focus on the size and state of the country’s road and rail network, the funding and maintenance of these respective networks, and the push to move road...
Real Economy Year Book 2014 (PDF Report)
This edition drills down into the performance and outlook for a variety of sectors, including automotive, construction, electricity, transport, steel, water, coal, gold, iron-ore and platinum.
Real Economy Insight: Automotive 2014 (PDF Report)
This four-page brief covers key developments in the automotive industry over the past 12 months, including an overview of South Africa’s automotive market, trade figures, production and the policies influencing the sector.
Real Economy Insight: Construction 2014 (PDF Report)
This five-page brief covers key developments in the construction industry over the past 12 months. It provides an overview of the sector and includes details of employment in the sector, infrastructure and municipal spending, as well as insight into companies’...
Real Economy Insight: Electricity 2014 (PDF Report)
This five-page brief covers key developments in the electricity industry over the past 12 months, including details of State-owned power utility Eskom’s generation activities, funding and tariffs, independent power producers and prospects for the sector.
 
 
 
 
 
This Week's Magazine
In the next 20 years, it was expected that, in Africa, more people would live in cities and towns than in rural areas, United Nations Habitat executive director Dr Aisa Kirabo Kacyira said at the Human Settlements Indaba that took place earlier this month in...
Tough-talking Human Settlements Minister Lindiwe Sisulu has committed government to building 1.5-million low-cost houses over the next five years, telling the Human Settlements Indaba in Johannesburg on Wednesday that the State would achieve this target through the...
Over the past 20 years there has been persistent concern about deindustrialisation in South Africa, as well as the fact that locally produced manufactured products have been increasingly displaced by imports.
Financial agreement for Ghanian independent power producer (IPP) Cenpower Generation Company’s $900-million, 350 MW combined-cycle gas-turbine power plant was finalised earlier this month, paving the way for the project’s construction to begin before 2015 in Tema,...
The revenue implications for South Africa of ‘base erosion and profit shifting’ by corporate taxpayers are firmly in the crosshairs of the Davis Tax Committee (DTC) and Judge Dennis Davis hinted last week that recommendations were being considered to “detect and...
 
 
 
 
 
 
 
 
 
Alert Close
Embed Code Close
content
Research Reports Close
Research Reports are a product of the
Research Channel Africa. Reports can be bought individually or you can gain full access to all reports as part of a Research Channel Africa subscription.
Find Out More Buy Report
 
 
Close
Engineering News
Completely Re-Engineered
Experience it now. Click here
*website to launch in a few weeks