Phakamile Hlubi-Majola: Pravin Gordhan and the attempted privatisation of SAA – A cautionary tale

Selling off our strategic assets and SOE’s while privatising essential services is a recipe for disaster, writes Phakamile Hlubi-Majola.

Selling off our strategic assets and SOE’s while privatising essential services is a recipe for disaster, writes Phakamile Hlubi-Majola.

Published May 13, 2024


By Phakamile Hlubi-Majola

The minister of the Department of Public Enterprises (DPE) Pravin Gordhan departs from his ministerial post, leaving a trail of failed State Owned Entities (SOE’s) in his wake.

As evidenced in the parliamentary portfolio committee’s scathing report on the botched South African Airways (SAA) privatisation deal, the minister spent a considerable amount of energy trying to privatise strategic SOE’s at the expense of South African citizens. Many SOE’s such as Eskom, SAA, Transnet and Denel are heavily indebted and face tremendous headwinds, often as a result of shooting themselves in the foot. The government’s response has always been to tout the involvement of the private sector as the panacea that will improve the performance of SOE’s.

According to a recent report on the SAA deal, by the Portfolio Committee on Public Enterprises, Gordhan’s failed attempt to privatise SAA has exposed major weaknesses in the legislative framework. There are no measures to protect state owned companies against unscrupulous politicians, who seek to sell off state assets to further their own agendas. The grim report lays bare and in detail, the failed attempt by the DPE to sell SAA, which was once valued at over R14 billion, for a mere R51.

Zero transparency, alleged irregularities

The Portfolio Committee on Public Enterprises investigated the allegations of irregularities made by the former Director-General (DG) of the DPE, Kgathatso Tlhakudi on the SAA privatisation deal, and it found that,

“The lack of transparency on the South African Airways transaction and the lack of documentary evidence further cast aspersions and doubt on whether the SAA transaction was indeed above board”.

This is because Gordhan made sure the deal was shrouded in secrecy and he refused to disclose to the public the process he followed to appoint the Takatso consortium. Disappointingly, the minister refused to account fully to the committee during its investigation.

This fact, and other alleged irregularities, many of which are made via a protected disclosure by the former DG of DPE, have prompted the portfolio committee to request an investigation by the Special Investigations Unit (SIU).

It is important to reflect on what happened at SAA because the state has committed itself to privatising all our SOE’s and this process, if it had been successful, was to be used as a blueprint for privatisation of other entities. The committee report focuses on the failure to follow process and it has acknowledged that the lack of a clear regulatory framework for Strategic Equity Partner transactions from the DPE, has put government at risk and this is likely to affect future transactions. But the challenge is far greater than the legislative process.

Capitalism in crisis

Perhaps part of the challenge is that the drafters of the legislation never imagined a time when SOE’s would be sold, and this gap has created room for rogue players to manipulate the process to benefit a handful of crony capitalists. Perhaps the founders of our constitution did not envision it because they knew that privatisation would never work in South Africa.

Fears regarding privatisation are justified. There is a litany of failed privatisation initiatives where strategic sectors of the economy and the livelihood of citizens were sold for the benefit of private interests.

The best example of this is the U.K. which privatised many of its essential and strategic sectors in the 80’s and 90’s. The provision of electricity, water and heating were among these. As a result, this has meant higher bills for essential services such as water, which has increased by 40%. Heating and electricity are also heavily affected by the lack of maintenance of the infrastructure, which should come as no surprise as private companies always prioritise profit taking and increasing shareholder value. Indeed, UK privatised water companies paid themselves and their shareholders an obscene amount of 57 billion Euros between 1991 and 2019, whilst failing to invest in infrastructure projects.

The high costs of services is a major contributor to the cost of living crisis in the UK, which is disproportionately affecting the working class, and the poor. The situation is so bad that there are pensioners and other vulnerable members of their society who cannot afford to heat their homes during extremely cold European winters.

An example of this is the famous interview of Elsie, a 77 year-old pensioner, who lost a lot of weight because she cannot afford food and eats once a day. Elsie uses her monthly bus tickets to travel on buses all day and night, in order to stay warm, because she cannot afford to pay her gas and electricity bill. Up to 5 million people in the UK are food insecure, according to research conducted by the UK parliament, and at least 2 million regularly use charity food banks for their daily nutritional needs.

These statistics paint a troubling picture of the real impact of privatisation on working people and their families. The fact that this so-called, ‘cost of living crisis’ is happening in the UK, which is a member of the G8 and is recognised as one of the most liberal capitalist economies in the world, is indeed damning. Capitalism is in crisis worldwide, and its usual go-to solutions, such as privatisation and austerity, are just not working. This is the lesson that South Africa must learn.

China’s approach to the management of SOE’s is an example worth following. It involves a delicate balance between reform, efficiency and maintaining strategic control. China is demonstrating that SOE’s can and should be playing a crucial role in growing the economy.

Selling off our strategic assets and SOE’s while privatising essential services is a recipe for disaster. What is required is a bold approach that will recapitalise and revitalise strategic SOE’s so that they can contribute positively to improving the lives of all South Africans.

* Phakamile is a Socialist and is “unapologetically biased in favour of the working class”. She currently works as the National Spokesperson for NUMSA. She writes for IOL in her personal capacity.

** The views expressed herein are not necessarily those of IOL or Independent Media.