Getting SOEs to work

The recent announcement that the South African Post Office (SAPO) has been placed under provisional liquidation doesn’t come as a surprise, but it’s concerning for the country and SAPO’s employees. As with many other state-owned enterprises (SOEs) like Eskom and SAA, progressively poor administration over many years has inevitably brought SAPO to this point.

Furthermore, it helps ensure the current financial sustainability of key sectors like agriculture, construction, manufacturing and mining.

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PUBLISHER Jacques Breytenbach

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But it doesn’t have to signal the end and it shouldn’t because SAPO has historically been the backbone of our interconnected society, providing an invaluable service, including a savings bank. However, the only way to financially resuscitate SAPO is to ensure that it has a saleable service the market still wants.

Plus, instead of trying to go it alone, there are major opportunities for government to engage with the private sector to create a modern and relevant SAPO. Classic examples in practice globally include Germany’s DHL (owned by Deutsche Post AG) and the UK’s Royal Mail (owned by International Distribution Services plc). Although both are privatised, they continue to serve their countries –and customers worldwide – with distinction. Imagine a SAPO that could follow suit, maybe even spreading its wings across Africa.

Public-private partnerships are a global trend

As has been proven worldwide, private investors are the best placed to restore, renew and grow any sector because they understand the risk factors, and what – in their view – is bankable. However, this doesn’t mean that the state’s responsibility needs to be compromised in terms of oversight and essential service provision.

A prime example is government’s overall responsibility for the provision of national energy security, but with free rein given for independent power producers (IPPs) and municipal entities to bridge the infrastructure gap.

Everyone wins. Growing the IPP market creates employment and new, competitive skills.

A recent example of a groundbreaking IPP initiative is the City of Cape Town’s announcement that it plans to develop a R1.2 billion solar PV plant with the potential to generate up to 60 MW, thanks to funding support from the C40 Cities Finance Facility. Feasibility studies are expected to be completed towards the end of 2023, with plant commissioning planned for 2026.

In April, the City also put out a tender for 500 MW of additional capacity to be supplied by the rapidly growing Western Cape IPP segment.

Compliance and more compliance

However, state funding for energy – driven by taxation and society’s needs – remains a dominant part of the equation, as it should, since enabling social and civil infrastructure is government’s primary mandate, with or without private support. And there’s always a business model that must be followed. A case in point is the water and wastewater treatment segment, where the billable services rendered are vital for municipal service delivery – so it’s an enterprise in practice.

That’s why, going forward, all SOEs and allied public entities must run as financially sound businesses that don’t drain the tax base with wasteful expenditure. The upside is that the Auditor-General South Africa’s office is now empowered to intervene and pre-empt material irregularities that have resulted in too many unsatisfactory audit outcomes – ones that now threaten the outlook for entities like SAPO.

Alastair

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