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Are South Africa’s Parastatals Accountable Enough?

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The South African government is increasingly anxious about the state of its public entities. The past few years, South African parastatals have been inefficiently managed and have underperformed, needing numerous government interventions and bailouts. Eskom is currently seeking approval from the National Energy Regulator of South Africa (Nersa) for a 34% tariff hike after receiving a large bailout from government to help its capital expansion programme. The price hike is needed to balance investment and injections from government with tariff increases. Many questions have also been asked about the management of Transnet since the dismissal of Transnet chief executive Siyabonga Gama due to allegations of fraud relating to tender irregularities. The controversial appointment of Phil Molefe as CEO of the South African Broadcasting Corporation (SABC) has also brought to light the procedural irregularities accompanying appointments within SOEs. Concerns about mismanagement, inefficiency, uncertainty and growing employee dissatisfaction pose grave challenges for good governance and accountability within these public entities.

 

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Due to irregularities, which are growing within SOE's, government has decided to initiate a two-pronged review on SOEs. This review was brought about by the recommendation of the Medium Term Strategic Framework (MTSF) for 2009 - 2014 which indicates the need to review the economic transformation agenda as well as the integration of SOEs into planning processes and improve evaluation of parastatal performance. As a point of departure, government needs to establish the objective of parastatals as profit or service selivery. There are particular concerns about this review such as the governance structures of these SOEs, as government is the shareholder and appoints the board and simultaneously performs an oversight function through the public enterprise department. The obstacles of changing the debate to one of professionalism and moving away from one that is based on political appointments in terms of management, poses more challenges for the current review.

 

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The growing concern about the management of government parastatals and their demands have dominated discussions, directly related to the ability SOEs have in fulfilling their necessary mandates. Awarding of tenders to individuals continues to be a prevalent trend in South African parastatals implicating entities such as SAA, Eskom and most recently Transnet. The conflict of interest, which exist within this system and the monitoring thereof needs to be increasingly regulated. To add to the concerns leading to tender irregularities and the lack of accountability and monitoring in SOEs are the concerns around the Protection of Information Bill and the inclusion of SOEs in such a bill. No decisions have been taken on this, but it would compromise the transparency and accountability obligations of SOEs not only financially but also accountability in terms of conditions of employment within these enterprises, especially affecting dealings such as wage disputes and negotiations.

 

According to the 2010 South African Budget Review, the treasury believes "it remains government policy that state-owned entities should largely borrow on the strength of their balance sheet to reduce government's gross contingent liabilities, promote efficiency, ensure competitive standards of delivery and discourage wasteful investment." The move towards attracting private investors in an attempt to raise funds needed for expansion of projects and capital investment, is one that should be considered with caution. A legitimate concern around investment of private entities and the sale of public assets is one that needs to be addressed properly and with proper disclosure to the public. This is necessary to garner support for and legitimacy of these decisions, considering the bailouts received by parastatals such as Eskom, SAA and the Land Bank.

 

The larger concern which arises surrounds the sustainability of these parastatals to remain at the forefront of innovation and effective operations, managed efficiently as to be self-sustaining and profitable in their operations. Despite receiving funding assistance from the state and the commitments made to cost cutting, the level of accountability by these enterprises demands stricter public scrutiny and disclosure. If parastatals cannot account properly for usage of public revenue, then non-state actors, specifically the media and civil society must demand greater accountability and transparency from relevant institutions including parliament.

 

There is a need for accountability efforts through more interaction with public budgets such as civil society-led initiatives like Open Budget Surveys. This initiative examines how accessible government budget information and participation are at a national level and could be extended to other sectors. Another initiative to assist in improving accountability measurements of SOEs are the Public Expenditure Tracking Surveys (PETS), which assists in tracking government expenditure and its material resources throughout the hierarchy up until the service providers.

 

These mechanisms on their own could prove challenging but still provide a useful platform for much needed policy dialogue, increasing accessible information to all stakeholders. There is a need for government expenditure of state funds through public entities to be properly monitored through initiatives such as departmental budget tracking surveys in order for public service delivery to improve and become more transparent. Government accountability in terms of financial spending and budget disclosure is an important means of protecting the poor, sustaining employment growth, building capacity for long term growth and addressing sectoral barriers to investment.


Written by: Shahnaaz Parker, Programme Assistant, Corruption and Governance Programme, ISS Cape Town

 

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