South Africa’s minister of public enterprises will soon introduce a bill in parliament to establish a government firm that will own and manage at least 13 of the country’s state-owned companies.

The National State Enterprises Bill will establish the State Asset Management SOC Ltd. and provide for the phased transfer of state enterprises to the holding company.

Many of South Africa’s state-owned companies, including power utility Eskom, rail and ports operator Transnet and arms maker Denel have been plagued by mismanagement and corruption.

These firms are currently overseen by the Department of Public Enterprises.

The department has gazetted the explanatory brief for the establishment of the new SOE, including its general goals.

The bill lists the following entities for potential transfer to the new holding company:

• Air Traffic and Navigation Services Co. Ltd
• Airports Co. Ltd.
• Broadband Infraco SOC Ltd.
• CEF (Pty) Ltd.
• Denel
• Eskom
• Sentech SOC Ltd.
• South African Airways SOC Ltd.
• South African Forestry Co. SOC Ltd.
• South African National Road Agency Ltd.
• South African Nuclear Energy Corp. Ltd.
• South African Post Office SOC Ltd.
• Transnet

According to the gazette, the department aims to “enhance the operational efficiency” os tagte companies through the holding company, which will allow it to achieve the government’s developmental goals.

The new SOE will act as a holding company that exercises control and ownership of all its subsidiaries in terms of the South African Companies Act and applicable legislation.

While the process is moving forward, there is still quite a path to tread.

In terms of the bill, the president will have to develop a “national strategy” working with the presidential advisory committee and in consultation with the new state-owned holding company and the minister(s) in charge.

This strategy will include the manner which the holding company and its subsidiaries must perform, as well as their various objectives, performance targets and developmental obligations.

The strategy must be reviewed every five years.

Notably, while the state will be the sole shareholder of the new holding company, the president is the single representative of the shareholder, centralising even more control over state assets within the presidency.

The bill notes that the president may transfer the administration of the Act or any power or function in the Act to a member of cabinet.

This is important in the context of the Department of Public Enterprises falling away in the future – meaning many of South Africa’s state companies will lose their line of reporting.

It was previously suggested that SOEs would report directly to the ministers in charge of their respective portfolios (Eskom to energy, Transnet to transport, etc) – however, the establishment of the State Asset Management company would deliver a new line of reporting tied directly to the presidency.

The full explanatory note can be read below:

Reporting with Bloomberg

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