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Gigaba outlines vision for private sector in infrastructure delivery

Public Enterprises Minister Malusi Gigaba on how the efficiency of South Africa's State companies could be bolstered. Camera Work & Editing: Darlene Creamer. (9/12/2010)

10th December 2010

By: Terence Creamer
Creamer Media Editor

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South Africa's Public Enterprises Minister Malusi Gigaba who, since taking over the portfolio in November, has emphasised the centrality of State-owned enterprises (SoEs) in delivering critical infrastructure, has now also outlined his vision for the role of the private sector in the development of fixed assets – albeit a relatively modest one.


Speaking at a function hosted by Deloitte Young Black Professionals, Gigaba said that private enterprises should “complement” the SoEs, particularly in areas where these enterprises were weak.

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To enhance the efficiency of the SoEs, many of which were currently underperforming, it was necessary, he said, to identify areas where private partnerships could help tackle specific areas of constraint, and where independent investors should compete directly with SoEs.


This approach was unlikely to overly enthuse the domestic business sector, with Business Unity South Africa (Busa) having already questioned the appropriateness of government’s plan to further boost public sector involvement in the economy, as well as the creation of yet more SoEs in the resources and banking sectors.

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Busa CEO Jerry Vilakazi argued that the private sector, rather than the State, should play the leading role in economic growth, development and job creation.


The organisation also called for greater competition in the areas of power and transport, where Eskom and Transnet have dominant positions, and for public–private partnerships to play a more prominent role in the infrastructure-delivery milieu.


“If we create a State that is continuously intervening in the economy to the point where it is not enabling free enterprises to evolve and to develop, we think that there is a problem,” Vilakazi has stated.


By contrast, Gigaba argued that the ‘developmental State’ had the “objective of actively intervening in the economy to drive investment in targeted areas to achieve a long-term vision of a higher value-added, labour absorptive and racially integrated economy”.


He wants the SoEs to “drive investment in infrastructure” and to build a “compact with the financial community to unlock funding for SoE infrastructure investment on special terms”.


More loans, guarantees and equity injections might also be required, and the Department of Public Enterprises (DPE) would “engage with the National Treasury and the economic cluster to implement a more coherent process for allocating budget for capital investments in government”.


The DPE would also seek to change the SoE investment-planning framework “from a balance sheet perspective to a perspective based on the required investment to unlock the full investment potential of customer industries”.


However, Gigaba also sent out a warning to the SoEs, expressing particular frustration with Transnet, which announced that the price tag on the new multiproduct pipeline had more than doubled to R23,4-billion on the same day that he announced Mafika Mkhwanazi as the group new chairperson.


The SoEs, he said, had to “go beyond a business-as-usual approach” and he promised the development of a “focused performance monitoring” systems, where the key drivers of SoE efficiency will be highlighted and where improvements against predetermined targets are linked to management remuneration.

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