Ramaphosa’s State Enterprises Bill sparks centralisation fears

Key topics.State Enterprises Bill centralises control under SAMSOC and the President.SOEs' losses raise doubts on feasibility of a sovereign wealth fund.Concerns over rushed legislation and conflicts with existing laws..Sign up for your early morning brew of the BizNews Insider to keep you up to speed with the content that matters. The newsletter will land in your inbox at 5:30am weekdays. Register here..The seventh BizNews Conference, BNC#7, is to be held in Hermanus from March 11 to 13, 2025. The 2025 BizNews Conference is designed to provide an excellent opportunity for members of the BizNews community to interact directly with the keynote speakers, old (and new) friends from previous BNC events – and to interact with members of the BizNews team. Register for BNC#7 here..If you prefer WhatsApp for updates, sign up to the BizNews channel here..By Patrick McLaughlin.President Ramaphosa has allowed a National State Enterprises Bill to be pulled from the past as an answer to the call made in the state capture report to fight corruption in the public service. Chief Justice Zondo's words were clear: "It is necessary to interrogate the role of the party (ANC) in actively engaging in corrupt activities for its own gain, allowing corrupt activities to continue under its watch.".There has never been a genuine interrogation, of course. After three years of waiting, the government has finally tabled two pieces of legislation as its answer to corrupt practices. The first, the Procurement Bill, has now been passed by Parliament, signed by President Ramaphosa, and sets out the rules for government purchasing. The regulations are awaited..Introducing the new plan .Visited China.Now, the National State Enterprises Bill has been introduced by Minister of Planning, Monitoring and Evaluation, Maropene Ramokgopa, proposing an entirely new way of how government is run. The plan, termed a "strategy," will entrust government departments with public service delivery alone, removing all policy issues and overall control to a single state-owned company (SOC) at the top..These are radical changes, but unfortunately, instead of a rebirth, both Bills are suffering from the same problem: an overwhelming desire for centralist control. This yearning for the past is masked under the guise of reform, with a preamble in each case designed to convey good intentions..Read more: Neil de Beer lambasts "insulting & idiocratic" SA politicians….Signed in.In the case of procurement, the supposedly independent public procurement officer remains within the iron grip of Treasury and the minister. Procurement offices are situated in "Treasury Towers" in Pretoria, a body that can issue binding instructions on any procurement activity and has powers to arrest and enter premises..In the case of the newly introduced National State Enterprises Bill, things are even more draconian. The new government structure proposed by Minister Ramokgopa of the President's office has an unfortunate resemblance to Khrushchev's politburo of the 1980s..Starting all over again.The draft Bill, released for public comment with minimal background in late 2023, drew significant attention and generated considerable responses from businesses across various sectors. Unfortunately, much of this effort has been diluted by time, exacerbated by the death of its author, Pravin Gordhan, and several parliamentary scandals. It eventually got lost in the rush to pass legislation before the May 2024 elections..However, the simplicity of the Bill at the time attracted attention, with 3,500 responses received. Whether Minister Ramokgopa, also a member of SACP, read them or not we have no idea, but it must have been one of her first jobs in her newly created ministry of Planning, Monitoring and Evaluation, a branch of the President Ramaphosa presidential kingdom. Read on..How it works.To summarise the proposal, each state entity, whether it be an SOE or government department, will be headed by the existing Director-General (DG), focusing solely on a centrally approved plan for service delivery and infrastructure supply based on the usual March State of the Nation Address and budget..Controlling all forty-odd state "enterprises" will be a state-owned company, referred to as the State Asset Management SOC (SAMSOC), which will hold and manage all national assets and appropriate funds. National Treasury and the Reserve Bank will act as the secretariat and be the financial officers, with the President in charge. SAMSOC will also be responsible for planning and disbursement to all three tiers of public service, with the same 47 ministers and their staff "owning" the 47 departments and 125 state entities on paper..Fast tracking aga.Notably, the National State Enterinprises Bill has reached the debating stage in Parliament quickly, suggesting that the Cabinet agreed to process the Bill at some point before the elections, making it a product of the old ANC well before any possible Government of National Unity (GNU)..President Ramaphosa, closely identified with the document, is being pursued for answers. As usual, he remains silent. So, what is so worrying about this Bill?.No mention has been made of the NEDLAC approval process, which is mandatory before a minister tables any legislation.Part of the new "strategy" is to speed up the parliamentary process, but there is little detail on how Parliament fits into the equation or how oversight by parliamentary committees is to be conducted.The Bill refers to "a direct line to the President," which is out of place in a process that is currently democratically separated from the President until after legislation is approved by vote in both the national and provincial contexts.The Bill appears to conflict with the Companies Act and the Public Finance Management Act (PFMA) and proposes amendments to large parts of current legislation, including the founding documents, of the 12 major SOEs without consultationThe Bill claims to represent a "strategy" (usually the subject of a White Paper for discussion) and is therefore only a concept..At the helm.The proposed company board consists of a retired judge, two Cabinet members appointed by the President, one representative from organized business, and three others also appointed by the President who "have been or are chief executive officers of public companies.".Minister Ramokgopa, who now proposes the Bill, stated in her introduction of the Bill to Parliament that all SOEs, now referred to as SOCs, would focus solely on "economic development," leaving social development responsibilities to a sovereign wealth fund, funded by profits transferred from the SOCs..Read more: State Capture 2.0? Why SA must reject the flawed National State Enterprises Bill.Results.Perhaps the proposals are not intended to create a country run like a cowboy operation by an entity known as South Africa SAMSOC Ltd with an all-powerful President as CEO, but this is the image it projects. One must remember that the late Pravin Gordhan, whilst a straight shooter who taught us to follow the dots on state capture, was also a socialist MP and one of the three South African Communist Party (SACP) ministers in the Cabinet. President Ramaphosa is a union man but has always eschewed the communist party line..In her introduction of the Bill, Minister Ramokgopa shared insights from a recent visit to the People's Republic of China where she studied the application of a similar "strategy". She emphasized the lessons she had learned. First was the principle of establishing a sovereign wealth fund within SAMSOC funded by profits from SOCs to support the country's developmental agenda. So, let's try that exercise..Doing the sums.With SAMSOC Ltd.'s future national consolidated balance sheet in mind, the total 2024 losses of the twelve largest SOEs stand at R28.634bn (Reuters and Wikipedia) and this sum has to be accommodated. To this must be added another R17.62bn (best estimate Chat GPT) for losses of the remaining 96 smaller SOEs. This will mean a total of R46.254bn is consolidated into national debt..To complete the Chinese exercise, similarly all SOE profits of R70.553bn will be credited to Minister Ramokgopa's new sovereign wealth fund, and she will find that for R46.254bn added to the national debt, already standing at R6 trillion, all she will earn for a rainy day is R70bn..This in a nutshell describes South Africa's big problem. The kingdom is being run by amateur copycats..Read also:.Eskom's tariffs set to surgeCeasefire begins in Gaza amid delayed hostage swapThe Economist: The science of breathwork and stress relief.This article was first published by ParleyreportSA and is republished with permission.

Ramaphosa’s State Enterprises Bill sparks centralisation fears

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