Minister of Electricity and Energy Dr Kgosientsho Ramokgopa engaging with business leaders in Komani, Eastern Cape regarding South Africa’s implementation of the Energy Action Plan on August 11, 2023. The culture of entitlement in South Africa is a serious threat to Eskom, says the writer. Picture: GCIS
Prof. Bonke Dumisa
MAROPENE Ramakgopa, the Minister in the Presidency responsible for planning, monitoring, and evaluation, recently held a media briefing where she excitedly told the public that the South African government is currently having serious discussions with the Johannesburg Securities Exchange, the JSE, on how best to list some of its State-Owned Enterprises, SOEs, at the JSE.
Ramakgopa believes that if the South African government works closer with the JSE and similar structures, the government can do a better job.
That media briefing somehow created a misleading picture that there is already a legislative bill in parliament dealing with this important topic. My research indicated that there are currently some bills in parliament that relate to SOEs but none that specifically deal with the listing of SOEs at the JSE.
For example, there is a National State Owned Enterprises Bill that deals with shareholder responsibilities and other issues at the SOEs. There is also the National Water Resources Infrastructure Agency SOC Bill that deals with water-related issues.
The major trade unions and most “political radicals” are opposed to any privatisation of the SOEs, purportedly because the SOEs play a more meaningful role in vital service delivery in South Africa. Therefore, it is important that the government start publicly engaging the greater public on how and where the corporatization of some SOEs may make more sense in improving service delivery.
Let us take a brief step back to the distant past when Telkom South Africa had a total monopoly of the telephone industry. It was very inefficient, with most of its customers always complaining about its don’t- care attitude towards its captive market. Then came 1994 when MTN and Vodacom brought cell phone calling to the South African market. That nearly wiped out Telkom from the market. That was the very first time Telkom had to compete for market share.
It was against that background that the South African government made a strategic decision in 2003 to list at both the New York Stock Exchange and also at the Johannesburg Securities Exchange. The Initial Public Offer, IPO, was R27. The same share today Wednesday 22 January 2025 is at R3 307,00 as of 14h23.
What made the listing of Telkom very successful? Telkom had by now totally transformed and was very competitive with some of its international shareholders demanding higher returns on investment. Competition forced Telkom to adapt; fortunately for it, it did not have free riders who felt entitled to its services without paying for those services.
As things stand today, Telkom still has the majority 55.3% of its shareholding in government hands, with 40.5% of its shares directly in the hands of the South African government and the other 15% owned by the Public Investments Corporation, PIC. The remainder of the shares are owned by private sector shareholders, and are not dependent on monopoly power to succeed, they succeed mostly on their business strategies.
This now takes me to some of the factors that may make the listing of the SOEs. Most of these SOEs have serious governance issues; most of them are in a precarious financial position; and most of them are bailouts dependant.
Telkom became immediately successful after listing because it already had a track record as a leading information and communications technology (ICT) service provider.
However, it may not necessarily be the case with most of the other South African SOEs that are dependent on the workforce that is just there to demand higher and higher salaries; with some of those workers actively sabotaging their own employer, as has been clearly proved at Eskom.
The culture of entitlement in South Africa is a serious threat to Eskom. The notion that “Electricity is a human right” poses a significant threat to the viability of Eskom as a stand-alone listed public company, as Eskom feels helpless in trying to disconnect many free-riders who do not want to pay for the electricity they use.
No seriously listed company can succeed on its own if it has no power to ensure that everyone who uses their services pays for them. Consider that Eskom is currently being owed tens of billions of Rand by municipalities who get paid by their ratepayers for their electricity supplied, but decide not to pay Eskom because they know that they will use the fate of the “indigent” if the electricity to those areas is disconnected.
This makes Eskom not a sellable candidate for a successful listing. This irony is thus that it was mainly SOEs like Eskom that triggered people to seriously consider whether listing as public companies was feasible to make them less dependent on the government for bailouts.
These are some of the serious questions we need to consider before deciding whether listing will be a feasible route to take or not. It would have been more convenient and strategic to have those SOEs that are always crying for bailouts being listed; unfortunately, the uncertainty of good cost containment and the unreliable client base in many areas will deter most potential investors from buying such shares where SOEs are involved.
The irony though is that many investors do actively buy the bonds being sold by such SOEs; the reason being that the investors are assured of their return on investments when they buy the bonds; but the same cannot be said about buying shares in businesses in precarious financial positions. I think it is precisely for this reason the government is looking at the issue of financial controls from two angles; strengthening governance at the SOEs that cannot be publicly listed, whilst looking at the possibility of publicly listing those SOEs with a feasible public appeal.
We wish the government well in selling this new approach, especially when they will be dealing with the ever-suspicious trade unions and the political demagogues who have “privatisation” as a swear word.
* Prof Bonke Dumisa is an independent economic analyst.
** The views expressed in this article do not necessarily reflect the views of The African.