Neither fish, flesh nor fowl as government wavers on privatisation
Looks at plans to create new parastatals
IS THE government taking two steps forward and one backwards? On the one hand, it proclaims a policy of privatisation (what it prefers to call "restructuring"), while on the other it makes moves to create new parastatals.
Government has announced plans to set up both a state-owned oil company and an information technology agency (Sita). In a speech at the opening of Parliament earlier this year, President Nelson Mandela mooted the idea of establishing a housing parastatal to give new impetus to the low-income housing market.
Housing Minister Sankie Mthembi-Mahanyele this week said the housing plan had been shelved for now, while the draft White Paper on energy remains vague on the establishment of a state oil company.
But Sita could possibly be up and running by the end of the year, provided Parliament passes the State Information Technology Act to be debated in this parliamentary session.
So the state has made known its desire to create new parastatals - whether now or at some future date. This move represents a significant policy shift. It seems contradictory to talk about setting up parastatals while espousing privatisation at the same time.
The essence of privatisation is the acknowledgement by government that it has no business running enterprises. Indeed, state-controlled businesses tend to be inefficient entities run with insufficient commercial acumen. Historically, to offset losses, the state subsidised these enterprises with taxpayers' money - which should be spent on improving social services delivery.
So why would government forge ahead with the creation of new parastatals at a time when it is trying to sell others?
Mandela's remarks, at the opening of Parliament, are pertinent. He told MPs that privatisation would take place where necessary, "but we shall also set up new state enterprises where market imperfections and failures play themselves out to undermine social programmes".
There is certainly a case to be made for parastatals, given SA's skewed historical inequalities but, as always, there is a need to guard against being too interventionist.
The state has the unenviable task of redressing historical imbalances in an environment in which government expenditure is declining in real terms, mainly a result of its own attempts to reduce fiscal deficits. This means it is being called upon to deliver social services, but with less money.
Equally, calls are growing within black business circles for the state to intervene directly in integrating blacks into the mainstream of the SA economy.
Market forces have so far failed to achieve either of the above and the state appears compelled to intervene.
Take housing as an example. The White Paper on Housing focused on the creation of a normalised housing market as a way of attracting private sector financial institutions' participation in the provision of housing finance. To achieve this, various mechanisms were put in place which effectively subsidised the participation of financial institutions in kick-starting low-cost housing. Despite these efforts, banks have not participated.
Figures by the Banking Council of SA (formerly the Council of Southern African Banks) show that, for the year to March 1997, banks failed to meet their goals for lending to the lower end of the housing market, achieving only 72% of their target of 50 000 loans.
The same applies in the oil industry and in IT. Blacks remain under-represented in these industries despite the increase in the number of empowerment transactions since 1994.
So the idea of a housing corporation, first suggested by the Congress of SA Trade Unions in its submission to the parliamentary standing committee on housing, an IT and an oil company to facilitate black entry into these areas may not be such a blatant contradiction after all.
However, lack of any real detail on the oil company and other state-owned assets that may be on the drawing board make it difficult to make a judgment.
If the idea is to facilitate black entry into the oil industry, government could use assets at its disposal, but this transaction would have to be done on commercial grounds. And, as recent examples show, access to capital remains one of the most critical challenges facing black empowerment.
If the idea is to meet the state's IT resource requirements, it may be preferable to outsource. Government has argued that Sita could save it R400-million by collating ineffective information technology departments into one streamlined operation. Strange then that it has said that Sita would not make a profit, but charge only enough to cover its costs and pay market-related salaries. Is the idea of running businesses not to make a profit, incentivise its staff and invest?
Sita would be formed by amalgamating the staff (1 500) and resources of the defence ministry's IT arm, Infoplan, the central computer services department and the IT department of the SA Police Services.
It would work as a centralised body to provide information technology products and services to any government department or provincial legislature.
That it would be formed using existing assets is comforting enough and suggests that funding would not be required to start up such an entity.
If it were to be a start-up, funding would be a major problem, in view of reduced government spending.
Key questions that need to be investigated are whether the entities can compete with the private sector as state-owned or as commercial enterprises and if Sita would be able to compete with the private sector for skills by paying market-related salaries. It has said it would.
Existing state IT has been unable to keep skilled personnel, one of the main reasons for its poorly handled IT procurement and inefficient use of expensive resources.
Historically, governments have a bad track record in running businesses.
If the purpose is to encourage empowerment, meet the state's IT needs and alleviate the housing shortage, there are many other alternatives, and almost all of them involve the private sector.