In September, the South African government tabled a bill in parliament that would significantly overhaul the governance of the country’s state-owned enterprises. The core proposal is the creation of a holding company that would be responsible for overseeing all state-owned enterprises.

The National State Enterprises Bill, as it’s known, signals perhaps the most significant shake-up of state-owned enterprises in more than two decades. Key among its proposals is the potential dissolution of the Department of Public Enterprises and its replacement by the holding company, to be named State Asset Management SOC Ltd.

The rationale for this shift has been outlined by Public Enterprises Minister Pravin Gordhan, who sees it as a strategic move to improve the financial performance of these entities, reduce political interference and strengthen professional management. This view is underpinned by the belief that a holding company would “separate the state’s ownership functions from its policy and regulatory functions, minimise the scope for political interference, introduce greater professionalism and manage state assets in a way that protects shareholder value”. However, questions remain about the effectiveness of such a structure, particularly the promises of reduced political interference and the introduction of corporate-style key performance indicators (KPIs).

Given the relevance and immediacy of this issue, it is appropriate to highlight the insights of Alan Hirsch, an associate researcher at the New South Institute, on the same topic. In an interview with the Brenthurst Foundation Podcast on November 2022, Hirsch delved into the intricate nuances of State-Owned Enterprises in South Africa, drawing on his work “The Role of S.O.E.s in Development in South Africa”. This work forms a chapter in the book “Better Choices: ensuring South Africa’s future“, edited by Greg Mills, Mcebisi Jonas, Haroon Bhorat and Ray Hartley, to be published by Picador Africa in 2022.

In the podcast, Hirsch provides a comprehensive assessment of the various facets of S.O.E.s. Not only does he highlight the disparities in the importance and effectiveness of different S.O.E.s, but he also underlines the significant drawbacks of the government’s tendency towards centralisation. Emphasising the crucial role of board governance, Hirsch argues for expert involvement without political interference. He also provides various examples of S.O.E.s, both within South Africa and globally, to demonstrate the potential they hold, given the right governance structure.

Further enriching the discussion, Alan’s insights were also featured in the Financial Mail on 29th September, authored by Claire Bisseker. Therein, he voiced his concerns: “All the time and energy that will be put into building new institutions would be better spent fixing the existing ones.” He stressed the urgency for the government to appraise roughly 740 state enterprises, streamlining their operations for better fiscal efficiency.

For a comprehensive grasp of the ongoing reforms in South African state-owned enterprises governance, delving into both the podcast and the Financial Mail article is recommended.