South Africa’s government should halt bailouts for state entities and review its ownership of more than 700 companies, according to a draft economic policy document compiled by the ruling party.
The current model for state firms “is dying,” the African National Congress, which is due to hold its national policy conference later this year, said in the document seen by Bloomberg. “The era of bail outs for state-owned enterprises is over.”
The call for an overhaul in the government’s approach comes after it sank billions of dollars into utilities such as power producer Eskom Holdings SOC Ltd. and the national airline with little return. Workers at the state arms maker haven’t been paid for 18 months and the state broadcaster, post office and oil company plan to cut jobs, the ANC said.
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Eskom and other state companies were the prime targets of a looting spree, known locally as state capture, that ensued during former president Jacob Zuma’s nine-year rule, and they remain hamstrung by unsustainable debt and a loss of skills. As a result the country has been subjected to intermittent power outages for more than a decade and mining companies have struggled to get their coal and iron ore to ports in the midst of a commodity boom.
“Most of these state-owned enterprises were once well-run, profitable companies that were internationally competitive,” the ANC said. “The decade of state capture destroyed many of them, as have structural changes in some of their sectors.”
Government’s options are limited as efforts to clean up corruption and appoint competent management will not rescue the majority of the stricken companies, the ANC said. Instead, it suggests companies could be closed or sold.
“There is no shortage of buyers wanting to buy some of the state-owned enterprises. Equity partners may be required in some instances,” the ANC said. “Time is running out. The status quo cannot survive.”