State Capture 2.0? Why SA must reject the flawed National State Enterprises Bill
Key topics:
- Centralised SOE control risks enabling another era of state capture.
- Bill exempts SAMSOC from key safeguards like the PFMA.
- Expanding nationalisation repeats a century of failed governance.
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By Noluthando Hlophoyi, Free SA
The National State Enterprises Bill, which seeks to centralise control of key SOEs under a new holding company, the State Asset Management SOC Ltd (SAMSOC), is being promoted as a solution to the inefficiencies and failures that have plagued these entities. However, while reform is indeed necessary, more of the same (namely nationalisation) is surely not the solution.
The Bill claims to streamline governance by placing control over SOEs in a single entity under the President's authority. However, this concentration of power is precisely what enabled state capture during the Zuma era and in fact throughout human history. The proposed SAMSOC will oversee key SOEs such as Eskom, Transnet, and SAA—all of which have been deeply implicated in past corruption scandals and has receive countless bailouts. History has taught us that power without accountability invites disaster.
Take the catastrophic failure of Eskom, South Africa's energy lifeline, as a cautionary tale. Political interference in its board appointments and operations led to financial hemorrhaging and operational collapse. Far from solving these issues, the Bill risks amplifying them by placing multiple SOEs into a single basket controlled by the executive branch. If one SOE falters, the contagion could quickly spread, jeopardising the entire portfolio.
State Capture 2.0: A real risk
The findings of the Zondo Commission should serve as a stark warning against the economic perils of nationalisation. The Commission's exhaustive investigation revealed that centralised control over South Africa's SOEs was not merely inefficient—it became a mechanism for institutionalised looting, systemic incompetence, and the erosion of public trust. Yet, the National State Enterprises Bill appears to ignore these lessons, proposing a structure that will continue the very conditions that enabled state capture.
Not only does the Bill nationalise already nationalised entities, but it removes the few existing safeguards against corruption and mismanagement. For example the Bill exempts SAMSOC from the provisions of the Public Finance Management Act and its safeguards. The PFMA has long served as a framework for ensuring that public funds are managed with discipline, transparency, and accountability. Its removal from SAMSOC's operational purview simply further widens the already open the door to unchecked discretion in financial decision-making.
The National State Enterprises Bill is an exercise in doubling down on a failed strategy. South Africa's state-owned enterprises are already nationalised entities—owned, funded, and ostensibly managed by the government. Their dismal performance over the past two decades has starkly demonstrated that state ownership alone is no panacea for inefficiency, corruption, or mismanagement. Yet, instead of exploring alternative ways to reduce the state's direct role in these floundering entities—like privatisation—the Bill bizarrely seeks to layer additional nationalisation onto this existing nationalised quagmire. It proposes consolidating the government's ownership into a centralised holding company, creating the illusion of reform while deepening the grip of state control. This approach ignores the simple reality that the government has failed to manage its SOEs effectively under the current model. Adding another layer of bureaucracy to these already mismanaged entities is not only redundant but an absurdly counterproductive exercise. It's akin to throwing more sand into an already jammed gearbox and expecting the engine to run smoother.
South Africa's experiment with nationalisation is not just a recent misstep—it is a century-long saga of inefficiency, waste, and systemic failure. From the nationalisation of railways and energy under apartheid to the post-1994 management of SOEs, the state has consistently struggled to manage enterprises in the public interest. Eskom, once a world-renowned energy supplier, has become synonymous with load-shedding and financial collapse. Transnet, intended to drive economic growth, has become mired in inefficiency and corruption. Throughout South African history, nationalisation often led to bloated, mismanaged monopolies that served narrow political interests rather than the broader public good.
This long history of failure underscores a simple truth: the state has repeatedly proven incapable of managing complex, capital-intensive enterprises with the necessary discipline, innovation, and expertise. Instead of learning from this dismal record, the National State Enterprises Bill seeks to expand the scope of nationalisation through the centralisation of SOEs under SAMSOC. This is a clear case of repeating the same failed strategy while expecting different results. South Africa's developmental challenges demand actual change—not a nostalgic return to ideas that have failed time and again.
Conclusion: Why is this being proposed?
Why, in the face of overwhelming evidence of past failures, is the National State Enterprises Bill even being proposed? Is it because the government genuinely believes that creating a centralised holding company like SAMSOC will magically solve the entrenched issues plaguing our state-owned enterprises? If so, then the conclusion is both alarming and disheartening: they are either profoundly ignorant of the lessons of history or hopelessly naïve about what is required to fix these institutions.
Alternatively, and more cynically but likely, this Bill is a calculated attempt to create yet another entity ripe for exploitation. By weakening oversight, centralising control, and shielding operations from public scrutiny, SAMSOC could easily become a new vehicle for patronage and looting—a sequel to the tragic saga of state capture. If this is the case, then the motivations behind the Bill are not merely misguided but outright corrupt.
Neither possibility inspires confidence. South Africans deserve governance that prioritises accountability, transparency, and genuine reform. This Bill achieves none of these goals. Instead, it raises the disturbing question of whether our government is out of its depth or entirely out of integrity. Either way, it must be rejected.
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