The Democratic Alliance (DA) is gearing up to fiercely oppose the National State Enterprise Bill in parliament, a move aimed at thwarting President Cyril Ramaphosa’s plan to centralise oversight of all state-owned enterprises (SOEs) in his office.
This could set the stage for one of the first significant fissures in the government of national unity — which includes the erstwhile official opposition — that Ramaphosa was forced to cobble together after the ANC lost its 30-year parliamentary majority in the 29 May elections.
This week, deputy minister of electricity and energy Samantha Graham, a DA member, said her party would strongly oppose the bill and push for all SOEs to fall under their related ministries to ensure efficient oversight and accountability.
“There is no way we can effectively deal with the energy crisis if Eskom is not reporting to us. It will be an impossible situation for us,” Graham told the Mail & Guardian.
“We have requested that Eskom be placed under us [the department of electricity and energy] before the national state enterprise bill is finalised because we do not believe this is the answer to SOEs and that is why we will oppose the bill at every turn.”
Last month, Ramaphosa’s office took charge of the restructuring of state entities, placing significant responsibility on Minister in the Presidency Responsible for Planning, Monitoring and Evaluation Maro-pene Ramokgopa.
This was after the dissolution of the department of public enterprises, which managed five SOEs.
The move aligns with the government’s plan to consolidate the ownership of strategic SOEs into a state asset management company. Ramokgopa will lead the establishment of this holding company.
Introduced by former public enterprises minister Pravin Gordhan in January, the bill proposes granting the holding company budgetary and managerial autonomy and is central to this transformation.
It proposes that the company has its independent board of directors selected by representatives from businesses and labour, as well as two cabinet members, and says the nominations and interviews must be chaired by a retired judge.
But Graham said this was not the solution for state-owned entities, which have become a financial headache for the treasury over the past three decades, bleeding the state of billions in guarantees and bailouts.
A presentation by the treasury in February showed that SAA, Denel, Eskom, the South African Post Office and the Land Bank together had made a loss of R9.8 billion.
“The idea of the holding company is just shifting public enterprises, without addressing the core problem,” Graham said.
She added that placing Eskom under the department of planning, monitoring and evaluation was contrary to earlier expectations that the electricity ministry would have direct oversight of the utility.
Analysts have expressed similar concerns that moving SOEs to a holding company under the presidency leaves them open to political meddling.
The bill and the concept of a holding company do not inspire confidence, said Olga Constantatos, the head of credit at Futuregrowth Asset Management, which manages about R199.03 billion assets on behalf of South African retirement, insurance and retail funds.
Constantatos pointed out the lack of a clear distinction between the new bill and previous ones under the department of public enterprises, which had struggled to reform SOEs and improve their commercial performance.
“There is a lack of clarity on the interplay between the bill, the Companies Act, the Public Finance Management Act and the existing founding legislation that may be applicable to certain of the state-owned entities,” she said.
“The bill takes a staggered approach as to which piece of legislation might be applicable at a given stage, but gives no consideration to any conflicts that may arise between these various pieces of legislation, or how these conflicts are to be managed,” she said.
In an in-depth analysis of the bill when the government first invited public comment on it late last year, Futuregrowth Asset Management listed one of its key defects as the limitless powers granted to the president, warning that “this concentration of power in the hands of one individual, with no guidelines, oversight or limitations is ineffective and potentially dangerous”.
“The presidential role is a political one, and we fail to understand how this action would prevent some of the challenges experienced by many of our SOEs — challenges which, by the government’s own admission, include inappropriate political interference.”
It urged for a wholesale amendment in order for the bill to guide the much-needed reform of state enterprises effectively, “otherwise, the performance of our SOEs will continue to be a notable risk to the South African economy”.
Legislators have also objected to putting state companies under the presidency’s umbrella and have called for it to have a parliamentary oversight portfolio committee to ensure its accountability to the house, like other government departments.
“The question is, can we trust President Ramaphosa to manage these companies without parliamentary oversight?
“Accountability is very important. The president is not expected to account to parliament in the same way that ministers account,” the uMkhonto weSizwe party’s John Hlophe said during a debate on the presidency’s budget last month.
“He also cannot be summoned by the portfolio committees in the same way that ministers can. We must establish a portfolio committee on the presidency.”
In response to the debate, Ramaphosa described the holding company model as international best practice and said the planning, monitoring and evaluation department within the presidency would be responsible for setting up the entity.