Presidential Review Committee calls for overhaul of SOEs

State needs review: Presidential Review Committee…

A key recommendation of the Presidential Review Committee (PRC) presented to the portfolio committee on public enterprises in Parliament said one of the thirty one recommendations emanating from the report is that a single over-arching law, proposed as the “State-Owned Entities Act” which would govern every state owned entity (SOE) through an “SOE Council of Ministers” should be enacted.

Such a council, the PRC suggests, should be drawn from the departments of public enterprises, trade and industry, economic development, national treasury, national planning and other relevant stakeholders. This should be established to oversee implementation of the proposed Act and to enable the mandate of continued collaboration between SOEs and government departments at all levels.

Split between those with commercial interests

The PRC report recommended that the proposed council be structured so that commercial entities which were SOEs were placed under one umbrella, and non-commercial and development finance institutions under another.

The report was commissioned by President Zuma following the Polokwane conference resolution, which was to strengthen the role of state-owned enterprises. The report covers four main areas — development and transformation, ownership and governance, the viability and funding of businesses, and their strategic and operational effectiveness.

Seven models looked at

Seven models of developmental states and their relationships with state owned bodies were considered by the PRC, the report concludes that a change in South Africa in the management and coordination of SOEs was clearly required.

This would involve vision, an enabling framework, performance monitoring and evaluation, with competence and the right capacity, all to be put in place effectively, otherwise there would be failure, the report said. The result is the proposal of a State-Owned Entities Act, governing every SOE and a controlling SOE Council, with such a mandate.

Salaries and wages recommendations separated

The PRC report also recommends a totally independent Central Remuneration Authority (CRA) to provide guidelines and parameters on remuneration of state employees with a common performance management system and to consider the mandate of each SOE and conclude on its right to exist, subject to critical reviews every five years.

The independence of the CRA from the SOEs was critical, the report adds.

Getting out of the kitchen

The report gets tough on its call for “rationalization”, suggesting the state “exits from those sectors” where market failure exists “and/or could be adequately provided for by the private sector”, focusing only on those SOEs that provided public goods or which were considered “strategic.”

The report clearly makes the suggestion that the state should “either divest, either fully or partially, from those SOEs that were seen to be under-performing or competing unsuccessfully against private operators, and to absorb those entities by incorporating them into line function department programmes.”

Not prescribing their call

Throughout its deliberations, the PRC says in its report, it had considered its role to be about informing, rather than prescribing, so that the policy decisions would be made in Parliament.

Most members, both the majority party members and opposition, welcomed the report with the caveat being expressed in some circles that it was unclear which SOEs should be considered as ripe for “rationalisation”.     Some members expressed the fear that unless things were carefully controlled, a massive “state ministerial empire might be built”.

MPs not to be on Council

It was suggested by one ANC MP that members of parliament might be allowed to join the SOE Council, but it became clear from debate that this was expressly precluded in the PRC report itself and should this happen, it would be totally contrary to Parliament’s role of oversight and therefore could not be allowed under any circumstances.

The Presidential Review Committee was chaired by Ms Victoria Phiyega

 

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