Bearbeiten von „Privatization South African Economic Remedy“

<br><br><br> Privatization! South African economic remedy! <br><br> By Marco Roodt <br><br><br>(adsbygoogle = window.adsbygoogle || []).push();<br><br> Category: Comment article (Article 1 of 2) <br><br> About the author: Marco Roodt completed doctoral studies in South Africa in the ninety eighties. Roodt studied communication of organizational change to complex stakeholders. His focus was on commercialization and  [https://www.kynghidongduong.vn/tours/tour-bali-tour-du-lich-bali-indonesia-4-ngay-3-dem-tu-ha-noi-tu-sai-gon-hcm-may-bay.html tour bali giá rẻ] privatization during South Africa&#39;s pre-1994 intended economic deregulation and economic liberation. Roodt says much can be learned from plans which never materialized as a result of a changing political landscape! <br><br> Election of Cyril Ramaphosa to state president of South Africa could be the most opportune moment to commence the privatization of state owned enterprises (&#39;SOEs&#39;) in South Africa. This comes in the wake of troubled economic years, and downgrade by two rating agencies; Standard and Poor and Finch. Moody equally influential, recently graded SA neutral status. <br><br> A downgrade to sub-investment grade ("junk" rating) by Moody would for instance have seen South Africa removed from Citi&#39;s World Government Bond Index. Removal could have triggered up to R100-billion ($9 billion) in asset sales by foreign investors. Had it taken place, other calamities might have followed. <br><br> Moody based, one could presume, its rating on predominantly the political leadership shift which took place in SA. In light of the latest grading by Moody SA&#39;s National Treasury made known that there are plans to stabilize debt, revamp State Owned Enterprises and boost growth in sectors such as agriculture and tourism. <br><br> South Africa, it was said by SA&#39;s national treasury, will consider partially privatizing struggling State-owned companies as part of wide-ranging reforms to be set in motion by president Cyril Ramaphosa. <br><br> Ramaphosa replacing Zacob Zuma (state president ex-officio), signaled the advent of positive political changes in SA. The shift attracted wide investor community attention locally and worldwide; despite investors being well aware of the country&#39;s economic and social situation (defined by very high poverty levels and unemployment). <br><br> Would the political shift be a silver bullet to attract new investment and prevent investment flight? Investors and the financial world globally, are not unaware of reality or naive when picking an investment destination. <br><br> They are insistent on risk criteria and well prepared when they decide to invest or divest. They would as in the case of SA, expect macro- economic restructuring beyond plans only before considering sizeable capital investment; and, involvement in foreign direct investment. They also are insistent on viability immediately and long term! <br><br> Capital and foreign direct investment (FDI) could be stimulated by privatization in SA. SA has many state owned enterprises whom are all already in place infra structurally and operating. Many do not show profit on an ongoing basis. <br><br> Privatization could change the situation particularly when you consider the capital injection which it would bring and innovative changes by co-owners of the enterprise. <br><br> Global investors know in the true sense of the word, time is money. Investors are not going to sit on capital waiting for an opportunity. They want an opportunity to come their way and quickly. SA government should, while turnaround, corporatization and commercialization takes its course, to save the SOE&#39;s from liquidation (as in the case of arms giant DENEL currently), commence with the preparation and passing of privatization legislation as a matter of urgency. <br><br> How could all of this work? <br><br> Perhaps learning from the past, as far back as the ninety-eighties, would provide some insight into the need for South Africa to privatize its very large state owned enterprises. The current SA government can learn from the past by considering the reasons privatization was never driven to some conclusion after it was gaining momentum in the late 1980&#39;s. <br><br> Much can be learned from the now late Wim de Villiers leadership on privatization and commissions led by him, dating back to the ninety-eighties. Government of the day realized that the way SOE&#39;s are run and financed were not sustainable. <br><br> Obviously in addition to de Villiers, over at least the past decade, more lessons can be learned from comment and research by proponents, scholars and experts on the topic of privatization in South Africa. <br><br> Starting with Eskom as the most controversial state owned company currently!, Drawing from &#39;The political economy of power sector reform in South Africa&#39; by Anton Eberhard, one learns about the Electricity Act which was amended in 1971 to allow ESCOM (today ESKOM) to retain substantially more earnings to build up a Capital Development Fund subject to the approval of the state president. <br><br> Consequences of the amendment were large price increases and disquiet amongst stakeholders, who thought ESCOM&#39;s management was arrogant and unaccountable, [https://twitter.com/search?q=leading&src=typd leading] eventually, to a government inquiry in 1983. <br><br> As early as 1983-4, following the enquiry led by de Villiers, the De Villiers Commission criticised ESCOM&#39;s governance, management, electricity forecasting methods, investment decisions, and accounting. <br><br> Recommendations by the commission led to changes in the Electricity Act in 1985 and to new Eskom and Electricity Acts in 1987, which in many ways paved the way to exploring possible privatization of the electricity state owned enterprise. <br><br> In 1988, the first Eskom privatization study was undertaken. It was commissioned by government. <br><br> Managed and led by Eskom assisted by a committee of government and industry stakeholders, the study was initiated at a time when the state was reviewing the performance of its SOE&#39;s. <br><br> Key to the findings of the study was the recommendation that Eskom be privatized in its entirety but did not comment on the possible introduction of competition to the monopoly. Competition could have been a perfect opportunity to attract foreign direct investment much desired by government then. <br><br> All will recall that the political landscape, soon after, started changing with the National Party government and the African National Congress (ANC) dialogue on South Africa&#39;s political future. <br><br> Political agenda topped any further consideration of privatization and this would continue more or less to today, twenty five years on! <br><br> Sanctions against South Africa also start taking its toll finally leading to a country facing an acute capital shortage, which forced the government to prohibit further foreign borrowing by industrial concerns and to regulate capital investment throughout the economy. <br><br> Capital spending by state enterprises came under scrutiny. <br><br> In 1985 De Villiers was asked to conduct a study similar to the Eskom one, of the South African Transport Services (SATS incorporating Rail, SAA, Harbours, Road and Pipe along with many subsidiaries,). <br><br> In his report De Villiers pointed out the need for restructuring SATS to enable the service to operate like a private, investor-owned company, recommending SATS become a commercial enterprise under government ownership, earning an appropriate return on capital and managing its assets towards a better return. <br><br> Parliament accepted the recommendations of the De Villiers Report in 1986. Parliament also added its own recommendation. SATS (to operate as Transnet Ltd in future), was mandated in addition to de Villiers recommendation, to act like a private corporation and to reorganize as a private corporation within four years. Government would be the sole shareholder. <br><br> Transnet Ltd was founded on the understanding that government is the sole shareholder, but might eventually opt to sell it to the private sector. <br><br> Transnet plans - as with Eskom - were shelved due to political dialogue becoming the agenda of the day. <br><br> One can speculate intelligently, had Transnet gone full out with its plans, free from political agenda, South African Airways which was the airway division of the holding company, would have sold off then. Instead to this day it remains a debt on the government&#39;s balance sheet! <br><br> Imagine the de Villiers recommendations on Eskom and Transnet privatization were realized, what would the probable gains have been? <br><br> Post the de Villiers era of exploring privatization, in 1999, the post-1994 government Department of Public Enterprises declared that priority would be given to the restructuring of the four biggest SOE&#39;s: Telkom (telecommunications), Eskom (electricity), Transnet (transport) and Denel (defence production). <br><br> Then, collectively, these four state owned enterprises, controlled 90 percent of the assets of the top 30 South African SOE&#39;s, provided 86 percent of the turnover and 94 percent of the net income earned. This provides perspective on the other current smaller state enterprises (of which there are a few hundred), in terms of turnover and income. <br><br> Technically speaking most of these top four state owned enterprises are currently in financial trouble and in need of government support through guarantees and loans to enabling them to fulfil their roles in the South African economy and across borders. <br><br> Their importance should not to be underestimated. Neither risk to the country, should they continue on their current path! They dominate key strategic sectors of the economy and have the potential to undermine overall industrial policy, economic progress and national well-being; or play a strong role in government plans to grow the economy as with the case of Eskom! <br><br> Why could privatization help prevent state owned enterprises slipping backward some more? <br><br> Data and other evidence on how privatization has impact on the privatized business bottom line and efficiency are readily available. <br><br> A leaf could be taken from British privatization. British privatization has been described by many as the most sustained and consistent singe-minded pursuits of public policy in modern times! <br><br> Privatization in Britain had to accomplish exactly what is now needed in South Africa. Needed are the improvement of efficiency of state owned enterprise, management of resources and free play of market forces in the economy. <br><br> Through privatization Britain turned itself from what some commentators described &#39;a lazy socialistic bureaucracy&#39;, into a country who later took its place as a leader in the global economy. <br><br> British privatization had the desired impact not only in the economic sphere on the country. State owned enterprises making massive losses - costing the British economy billions- were turned into efficient enterprises contributing gradually but surely to the taxation base. <br><br> Popular capitalism replaced socialism through public shareholding and employee shareholding. <br><br> Privatization raised much need capital for government. In the case of South Africa one of the major motivations behind the 1989 privatization of Iscor was the prospect of state revenue. Proceeds from the selling of British state assets generated capital to pay debts. <br><br> Gradually the British economy also benefited by government spending less on subsidies. <br><br> British regulatory regime changed with privatization, enabling transparency on past cross-subsidisation practices. <br><br> British public who had generally speaking a great level of antipathy towards poor performing government enterprises welcomed privatization. <br><br> Politically, privatization compelled parties to rethink policies and  [https://www.kynghidongduong.vn/tours/tour-bali-tour-du-lich-bali-indonesia-4-ngay-3-dem-tu-ha-noi-tu-sai-gon-hcm-may-bay.html kynghidongduong.vn] what is in the interest of the country, while maintaining their political support among electorate which now had new perceptions of the reigning party. <br><br> Privatization was widely accepted by the media who gave their support through positive coverage and comment on success stories. <br><br> Labour Unions, considering its influence on the pre-privatization economy, started playing a smaller political role as they had to weight the economic benefits privatization brought to members, against losing the member. In other words, labour unions were forced to revise what they had to offer their members beyond political and workplace promises only <br><br> All brings one to the topic of the South African government, prior to Ramaphosa, seemingly lack of will to take the privatization-bull by the horns; and, the culture of holding on to failing state owned enterprises at the cost of the tax payer and the running of an efficient economy? <br><br> It would be insightful to get reasons for this. One can speculate about a few reasons. <br><br> Ideology and the historical bond between the current government, labour unions and the SACP would always play a role when resistance against privatization is discussed. It is time a national multi stakeholder debate starts around the cost to economy as a result of ideology and the historical bond. The regulated cost of labour versus individuals&#39; private rights to sell his/her service at the price he wants, within the context of draconic labour acts and overregulation of the employment market, should top the agenda! <br><br> Failing governments resort to central planning and control of the economy. Privatization does exactly the opposite. It opens up the economy where expertise, capital and a variety of stakeholders, including government, grow the economy and production along with consumption can be regulated more efficiently by the market and price mechanisms. <br><br> South Africa has a bloated civil service which now steadily are becoming unaffordable. A result of believe that the country is a social-democracy and the state should be the creator of jobs. Government later admitted they could not be the sole creator of jobs and reaffirmed the role private sector should play. This coincide with the role privatization could play. <br><br> More to the point, at present more than two million of people are employed collectively by central government, provincial government, local authorities and a number of statutory bodies. As a result, ability of the civil service to resist privatization and deregulation should not be under-estimated. <br><br> Government is well aware of possible resistance by civil servants, but, what will happen if the day arrives when salaries cannot be honored, Or slightly less drastic but serious, as former and now late president PW Botha did in 1988, announce salary increase freezes of all public servants. <br><br> Unemployment! South Africa has an employment crisis. Many millions of able people cannot be accommodated in the economy, resulting in them being dependent on some form of government subsidy. <br><br> Would privatization aid in addressing unemployment? One is confident it would, but not in isolation. Government would always play a role as the custodian of many billions of rand, as the most recent national budget of R1.2 trillion shows. Huge amounts financing development projects could be contracted to private suppliers of services with the proviso the unemployed are taken in as temporary employees at least, as a departure towards more permanent employment. <br><br> Addressing the need for privatization, government seemingly is not taking it seriously enough, despite the likes of Eskom and the national electricity crisis. One should spend time on what the entire process of privatization entail (theme for a follow-up article) within the context of evidence to commence as a matter of urgency; and the obstacles in the way! <br><br> Government need not look far for candidates to privatize, be it in its entirety; or with themselves a minority shareholder at what could be 49 % of the stake. <br><br><br>(adsbygoogle = window.adsbygoogle || []).push();<br><br> End of article 1.../ <br><br> Further read- <br><br> &#39;The political economy of power sector reform in South Africa&#39; by Anton Eberhard [ ][mailto:businesscentre@mweb.co.za businesscentre@mweb.co.za]. Or call 073 431 4990. Personal profile- [  (adsbygoogle = window.adsbygoogle || []).push();]