Several economists are calling for the privatisation of State-Owned Enterprises (SOEs) citing government’s increased debt burden over the past 10 years and questioning its long-term financial viability.
This comes in the wake of the Reserve Bank’s decision to hike the repo rate by 25 basis points, putting even more pressure on consumers.
Economist, Lumkile Mondi, say the privatisation of SOEs such as Eskom, Denel and SAA could help relieve the state of its financial burdens.
“The SA government owns about 41% of the SA economy. Government is running a huge debt to GDP ratio at the moment. We have challenges across many areas of our economy and the SARB yesterday increased interest rates. South Africans are not coping because of high costs such as VAT increases, food increases, etc., so I think the only way for us to relieve the state is to sell some of its assets so it can improve the financial position of South Africa,” says Mondi.
However, political analyst Khaya Sithole disagrees saying government needs to adopt a private sector mind-set to help save SOEs.
“The state-owned enterprises in their current form are not performing. My argument is that it’s not privatisation that we seek, but profitable SOEs because if they were profitable we wouldn’t have this problem. The question that has to be asked is can we reach that profitability without some form of private sector intervention and what form of intervention do we need? Do we want outright shareholding to be in the private hands or do we want to have a model that the private sector has mastered the art of running businesses. So even though the state might be a shareholder, you must have a private sector mind-set in running the business rather than simply selling off the family jewels because we happen to be at a stage where we have a high debt to GDP ratio,” says Sithole.