An Accelerated Agenda Towards the Restructuring of State Owned Enterprises

Policy Framework

Ministry of Public Enterprises
Republic of South Africa
August 2000

This document is available in other formats (see below)

Table of Contents

SUMMARY

FOREWORD

  1. INTRODUCTION

  2. VISION FOR RESTRUCTURING 

  3. THE ECONOMIC AND SOCIAL EFFECTS OF RESTRUCTURING  

  4. PROMOTING APPROPRIATE REGULATORY AND COMPETITIVE FRAMEWORKS 

  5. PROMOTING EMPOWERMENT

  6. IMPROVING CORPORATE GOVERNANCE AND ENSURING IMPROVED ETHICS AND PROBITY 

  7. IMPROVING THE RESTRUCTURING PROCESS

  8. FOCUS ON FOUR KEY ENTERPRISES

  9. SUMMARY AND CONCLUSIONS

APPENDIX 1: PROCESS FLOW CHARTS

  1. Overall process flow chart
  2. Strategic analysis process
  3. Enterprise restructuring planning
  4. Transacting process
  5. Post-restructuring evaluation process

ISBN: 0-621-301-91-4

This document is the full Policy Framework for an accelerated agenda for the restructuring of State Owned Enterprises. It has the intention of providing the reader with the rationale behind the policy. As such it includes detailed discussions on the various policy issues. A summary document providing the policy more succinctly has also been published.

To obtain additional copies of this document, please contact:

The Librarian
Department of Public Enterprises
Private Bag x15
HATFIELD
0028
South Africa
Tel: +27 12 342 7111
Fax: +27 12 342 7224
Enquiries: lipmanv@ope.pwv.gov.za

The document is also available in PDF (Adobe Acrobat Reader) and printed formats

Foreword by Jeff Radebe, MP

Minister of Public Enterprises

 

There are many challenges facing South Africa. At the top of the list is the eradication of the crushing poverty that holds back the development of our country and region. We have adopted the view that the real conditions of every day life require a strong democratic developmental state. Only by adopting this perspective will we be able to rise above the challenges of the day and establish the conditions in which all our people are able to enjoy a better life for all.

Part and parcel of the developmental state are the State Owned Enterprises, or SOEs, that are described in some detail in this Policy Framework. Our SOEs do not operate in a vacuum – they engage in economic activity and provide essential services that traverse even our borders. We have found that, in many instances, their traditional methods of operation and business management, human resource development, and even their targeted constituency base were inappropriate in a democracy. Furthermore, they command large procurement budgets, social and human resources and some of them dominate the economic sectors in which they operate. Since the emergence of democracy, South Africa has begun to integrate itself into the global environment as a worthy member of the international community. In particular, our country has become an important agent towards the realisation of the African Renaissance. In this context, the accelerated restructuring of SOEs to meet these combined challenges has become a matter of urgency.

Recognising this need, Government, at a Lekgotla(1) on the 29th November 1999, directed that a detailed and coherent policy framework be prepared to guide the restructuring process into the 21st Century. The Policy Framework will enable Government to co-ordinate thinking on the restructuring of State Owned Enterprises. As such, it goes beyond being merely the integration and consolidation of policy arising from the experiences of Government since 1995 when the initial framework for restructuring was agreed by Cabinet.

In summary, Government’s policy with regard to State Owned Enterprises is more properly referred to as a restructuring programme, and not in the more simplistic terms of privatisation. The programme was and remains designed around a multiple array of strategies, or mixes of options, that are designed to ensure the maximisation of shareholder interests defined in economic, social and development terms. Thus restructuring refers to the matrix of options that include the redesign of business management principles within enterprises, the attraction of strategic equity partnerships, the divestment of equity either in whole or in part where appropriate, and the employment of various immediate, turnaround initiatives.

At the enterprise and sector level, restructuring involves improving the efficiency and effectiveness of the entity, accessing globally competitive technologies where appropriate, mobilising private sector capital and expertise, and assisting the creation of effective market structures in sectors currently dominated by the SOEs. At the broader, macroeconomic level, restructuring initiatives aim to attract foreign direct investment, to contribute to the reduction in the public borrowing requirement, and to assist the development of an economic context that promotes industrial competitiveness and finances growth. Social imperatives include the need to ensure growth in employment, particularly in new areas of endeavour, and to rationalise or develop new skills within the labour force and their deployment throughout the economy.

Obviously, the time lapse between initiating an economic or social programme and the realisation of objectives cannot be defined with any accuracy in terms of months or even in many instances, years. However, initial results indicate that substantial sums of money have already accrued to the state since 1996. Furthermore, the recent financial results of the major SOEs, in particular Transnet, including SAA and Spoornet, Denel, Eskom, and Telkom have revealed that internal reorganisation has resulted in very promising turnaround successes since the restructuring programme was initiated.

The past five years have represented a steep learning curve for the Government, and, although not all initiatives have been trouble-free, we can justly claim that we have established a solid foundation for the accelerated restructuring agenda that is reflected in this document.

The Policy Framework describes a dynamic process that will require careful monitoring and constant evaluation. As implementation unfolds, I am sure that there will be areas that may require revisiting. We do not wish to cast in stone timetables and procedures that are proved inappropriate later through the experience of action on the ground. At the same time we believe that this framework provides satisfaction, security, and will form the basis for further confidence for employees, managers, boards and investors alike. Government, as the primary shareholder in many instances, will ensure that the restructured SOEs will continue to play a responsible, proactive role in the development agenda. This document has been presented in a format that by providing the discussion around issues ensures that the readers understand the rationale behind the policy.

I am confident that the Policy Framework provides sufficient consensus for all stakeholders to remain part of the team who will ultimately be responsible for the success of the restructuring initiative. Indeed, it remains our intention to seek the views of all stakeholders affected by the restructuring process it unfolds to deal with any unforeseen problems that may arise. To this end we will use the institutional mechanisms afforded to us by the Constitution, Parliament and Nedlac, as well as other less formal channels to ensure that the views of all affected stakeholders are heard.

I wish to thank all those, both inside and outside of Government, who have contributed to the development of this Policy Framework.

August 2000

 

1 Introduction

At a Lekgotla on 29 November 1999, the Interministerial Cabinet Committee on the Restructuring of State Assets (IMCC(2)) directed that a policy framework be prepared to guide the restructuring process into the 21st century. This policy framework would provide a more comprehensive framework than has existed to date, in order to ensure a consistent approach to restructuring across Government and to address perceived market uncertainties about Government’s restructuring priorities. To this end, the policy framework that follows will address these requirements by focusing on:

Notes:

  1. Lekgotla is a South African word for a type of workshop where decisions are taken

  2. The IMCC has since been replaced by a Ministerial Sub-Committee