Key topics:
- Centralising state enterprises increases inefficiency, political interference, and corruption.
- The Temasek comparison is flawed; Singapore’s model doesn’t apply to South Africa.
- Decentralisation and privatisation of state-owned companies would boost efficiency and reduce risk.
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*By Nicholas Woode-Smith
The draft National State Enterprise Bill is nonsensical and should be scrapped in its entirety. The draft law proposes the creation of a centralised holding company that will own and oversee state companies like Eskom, Transnet and others. But why does it aim in this direction?
These companies are state-owned. They are already owned by a centralised agency. Centralised control has not helped them become more efficient or effective. If anything, centralised control has led to increased political interference, bloat and inefficiency.
The virtue of decentralisation is that rot does not spread across institutions. If Company A is performing badly, the causes do not then necessarily spread to Company B. But if Company A and B are owned by a central agency, or the government, then fundamental issues in the centralised institution or even its subsidiary companies can spill-over.
This can already be witnessed in South Africa. The government owns Eskom and Transnet, and its ideology of socialism and perverse corruption has seeped into the parastatals and caused much of its fundamental issues. The fact that this proposed new centralised state-owned company will still be state-owned means it will still be under political control of ideologues and corrupt cadres. All that will change is that there will be another layer of bureaucracy to furnish with taxpayer’s money, and any previous state utility that may have has some semblance of competency due to decentralisation will lose its agency.
There is no point starting state-owned companies. They are still government run and if they have to be publicly administered, they should be done so directly by their relative departments. When possible, they should not be under the purview of the state at all and should rather be privatised.
Claims that this new centralised holding company will be run like Singapore’s Temasek are also nonsensical. Singapore is always an outlier. It’s a city-state founded by an avowed meritocrat and capitalist. Singapore has aspects of its society that on the surface look like central planning, but this is all for the ultimate purpose of outfitting the country to be a capitalist society. The ANC’s socialist would not like South Africa to embrace Singapore’s mode of central planning. It was mean the devastation of trade unions, the banning of communists, and the preferencing of big business.
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Further, Temasek isn’t some central agency administering state utilities. It’s a sovereign wealth fund that acts as a financial manager for state-mandated pensions and investment. Its purpose goes far beyond trying to manage some incompetent utilities. It’s far closer to the Public Investment Corporation (PIC), which already exists.
We really don’t want a sovereign wealth fund or centralised investment agency in this country. It would be looted of everything and be a fiscal blackhole. Until such time as our corruption levels is brought under control, we should be limiting government access to money – not increasing it.
I suspect that comparisons to Temasek are actually based in ignorance, and that the new enterprise will not reflect Singapore’s investment company. Instead, I suspect that the new state-owned company will just be another badly run government department, existing under another department, that exists under a ministry. Layers and layers of chaff, with nothing getting done.
Rather than further centralising our state-owned companies, they should be further decentralised. As mentioned above, decentralisation makes companies more efficient. Not only does it prevent the spread of problems, but it also mitigates risk by spreading eggs into many baskets, as well as chopping up often bloated and badly run entities into easier to watch and manage chunks.
State-owned companies, wherever possible, should be decentralised and then privatised, or have their functions granted to provincial and local governments. This will help far more to improve the overall prosperity of this country than centralising stupidity even more.
Nicholas Woode-Smith is a senior associate of the Free Market Foundation. He writes in his personal capacity.
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