Neelam Rahim | neelam@radioislam.co.za

2-minute read
25 October 2024 | 09:53 CAT

SA Overview of South African Stated Owned Enterprise (SOEs) 2023. (Image/BMIT)

The Institute of Race Relations (IRR) has called for an end to government bailouts for state-owned enterprises (SOEs), highlighting concerns over irregular expenditure and ineffective management. This call follows the Auditor-General’s report, which reveals severe financial mismanagement within these entities.

Over the past five years, the government has spent more than R250 billion in bailouts for SOEs, with Eskom receiving the largest share to address South Africa’s persistent load-shedding crisis. In conversation with Radio Islam International, Chris Patterson from the IRR remarked, “While we have experienced over 200 days with reduced load-shedding, the Auditor-General’s findings show that SOEs continue to struggle with wasteful and irregular expenditure.”

Despite these efforts, Patterson questioned the value that these institutions offer taxpayers. “The entire point of an SOE is to provide value for South Africans. If bailouts continue without results, citizens are not getting the benefits they deserve,” he emphasized.

A central issue identified by the Auditor-General is the lack of consequence management. “Board members, particularly at Eskom, have operated without accountability, leading to the squandering of public funds. MPs have raised these concerns repeatedly, but no effective action has been taken,” said Patterson, referencing the challenges exacerbated by past incidents of state capture.

The debate on whether SOEs should continue operating under state control is ongoing. Patterson proposed partial privatization as a possible solution. “A public-private partnership could allow independent power producers to enter the market, promoting competition and lowering electricity prices. This could reduce reliance on government bailouts and minimize irregular spending.” However, he also reassured the public that the government would maintain regulatory oversight over private operators to prevent abuse of power.

Patterson stressed the need for greater public awareness regarding SOE bailouts. “South Africans deserve to know how their taxes are being spent and what value they receive in return. Transparency will help create pressure for change.”

With calls for alternative funding models, such as issuing bonds for entities like SAA or Transnet, Patterson cautioned that poor governance could deter potential investors. “Investors won’t support companies that pose high financial risks,” he warned.

The conversation around the future of SOEs remains complex. As South Africa navigates these challenges, balancing public interest with sustainable management is crucial.

Listen to the full interview on The Daily Round Up with Moulana Junaid Kharsany and Chris Patterson here.