Catching on slowly to a growing idea
IT TOOK the government almost two years to commit itself to the sale of state-owned enterprises but, since early last year, there are few ministers who still question the wisdom of privatisation.
The implementation of this policy has, however, been slow and tedious, bogged down by trade union resistance and a labyrinth of consultative and negotiating forums.
Although Minister of Public Enterprises Stella Sigcau committed herself to the full or partial sale of seven parastatals this year, the remaining five (Safcol, Alexkor, Aventura, Autonet and Airports Company) are only likely to come under the hammer next year. None of the four have yet appointed advisers suggesting differences between labour, government and management on how to proceed with the sales.
In a recent speech Sigcau insisted that the trade unions are being won over and there is growing consensus on the need for restructuring and privatisation.
Yet, on the shopfloors and in the office corridors of major parastatals, the differences in approach between managers and trade unionists are still evident, leading to costly delays.
These are largely of the government's own making. Eager to appease the unions, which were, and still are, horrified at the government's backing of privatisation, Sigcau agreed to put in place numerous restructuring committees and add a considerable list of social obligations to the process.
The number of committees that have to back a restructuring move can be as high as eight, from a parastatal's shopfloor via sectoral meetings and culminating in a six-a-side session between labour and government.
The delays arising from government dithering, as well as the extensive round of negotiations are of concern to analysts. "While a number of parastatals, such as the Airports Company, have benefited from that little bit of extra time to ready themselves for privatisation, others (Safcol, SAA) have lost considerable value," says Pieter van Huyssteen, head of Price Waterhouse's corporate finance division.
Sigcau also agreed that government should retain a majority stake in the bulk of restructured enterprises, a move which could alienate potential foreign investors.
Colin Coleman, director of Standard Bank's public finance division, warns that while government should not discard its social obligations, it must look at the cost that goes with them. He adds: "Investors will always price these obligations into the bid; the more obligations the less the price."
Another analyst warned that in her effort to please the unions, Sigcau failed to seriously address the parastatals' business requirements. "The concerns of the actual business should always be paramount to social obligations or union concerns," he said.
Coleman and Van Huyssteen agree about the priorities that public sector corporations should set themselves if they want to attract top-notch investors.
"What investors are looking for is, very simply, a healthy return on investment," says Van Huysteen. "They can almost be assured of that if the business has clear commercial objectives and strategic directions."
Other criteria, says Coleman, are market opportunities (here, SA's status as the hub of the region counts in its favour) and the cost of human resources (expensive unskilled labour and a shortage of managers are a disadvantage).
The sale of the SABC radio stations for R516-million last year and the sale of 30% of Telkom to SBC Communications of the US and Telekom Malaysia for R5,6-billion has provided some clarity on what government plans to do with the proceeds from privatisation.
Income from the sale of so-called non-strategic assets, such as Aventura, Alexkor and Safcol, are likely to be used to redeem state debt. This is the intention with the proceeds from the radio stations, although the issue still has to be finalised with the SABC.
Parastatals that provide a crucial socio-economic function are likely to retain the bulk of their proceeds. Telkom had to surrender about 20%, or R1.2-billion, to the state but retained the remainder (R4.4-billion) to finance the roll-out of the telecommunications network. Were the government to sell Eskom, a similar equation could be used.
The sale of Telkom has been widely rated as a success. Not only did the two telecoms operators invest a considerable amount for a minority stake, they also committed considerable resources to the expansion of telephony in South Africa, particularly in poor rural and urban areas.