South Africa should induce the privatisation of some of its State-owned assets to ease the financial and capacity strain on the government, while ensuring an injection of revenue into the State coffers.

However, balanced State and private sector participation was required, as both had critical roles to play as the country developed and grew.

Speaking at a Neotel/Mail & Guardian business breakfast on Tuesday, Industrial Development Corporation chief economist Lumkile Mondi said the debate around the privatisation of the country’s assets should be retabled – removing the government’s current stranglehold on strategic assets on the back of disappointing performances by State-owned enterprises (SoEs).

“Increased revenue can only come from growth – if you can’t run it [the enterprise] efficiently, give it to someone who can,” he asserted.

He cited continually delayed projects and the ever-rising costs of these projects, pointing to Eskom’s embattled energy expansion and rehabilitation plans. He also indicated that the development of South Africa’s rail system and the roll-out of new rolling stock could fair better in the hands of the private sector.

Democratic Alliance spokesperson for finance Tim Harris added that, while not all State-owned assets should be privatised, the government could receive a revenue boost and free up resources and constrained capacity should it allow privatisation of some of its SoEs.

A developmental State, he said, needed to spend 10% of gross domestic product (GDP) on infrastructure; however, owing to capacity constraints, South Africa intended contributing only 8% of GDP this year and 7% for each of the next three years – despite the guidelines of the National Development Plan – to infrastructure.

The country had also, over past few years, underspent its infrastructure budget by 22%.

Harris cited Brics counterpart Brazil’s successful 51% privatisation of the Guarulhos International Airport, in São Paulo, which generated revenue for government and addressed its limited capacity to manage the airport.

Airport Company South Africa won the bid for the 20-year concession, which would include the expansion, maintenance and operation of the airport, in partnership with Brazilian company Invepar.

“This type of [privatisation] is not even considered [in South Africa],” he said.

There were privatisation opportunities across the board, including that of South African Airways (SAA), which would benefit government more in the private sector, noted Harris.

Privatising SAA could provide an opportunity for government to follow in the steps of Brazil. The possible deal would see an injection of further funds into the national coffers, while alleviating capacity and financial limitations, saving the State from potential future multibillion-rand bailouts, and induce competition, he added.

The embattled airline, which received a guarantee of R5-billion in loans over the next two years from government, was expected to table its turnaround plan to government at the end of March.

Harris said even Eskom – to a degree – could benefit from privatisation, particularly through shifting the responsibility of old generation capacity from the State to the private sector for refurbishment and commissioning.

Public Enterprises Minister Malusi Gigaba last year stated that there were no plans to privatise Transnet and Eskom and no intention to split the companies, adding that infrastructure development was the responsibility of the State and would remain in government hands.

However, management consultancy Four Rivers MD Leipollo Pheko said more privatisation was not the cure for corruption, unemployment and poverty, nor was it a guarantee of efficient and flawless service and operations.

She believed the country held the right balance, but felt that an improved quality of intervention was required, along with greater coherence and accountability.