State Owned Enterprises – there’s hope on the horizon

More than 300 parastatal organisations, or state-owned enterprises (SOEs), will be put under the microscope in the next year. Many of them are really struggling, like the SABC, but there are some that are regarded as leading lights, like the Development Bank of South Africa, Elaine Porteous tells this month’s SmartProcurement.

A presidential review commission has just been set up by the government to review the state of their operations. The good news is that private sector experts and professional business people have been recruited to the team which must report back in a year’s time.

“The starting point is to establish what state our parastatals are in,” says Riah Phiyega, chairperson of the review. In the 1990’s the SOEs were “corporatized” meaning that they were to be run on business lines with Boards and corporate governance but with possible government funding and subsidies.

The original intention was to “delink parastatal operations from bureaucratic and political processes,” notes Iraj Abedian, a well-known economist and one of the review commission members. He notes that one of the current problems is that SOEs have multiple lines of reporting and accountability.

Phiyega says a number of matters were at issue such as “would changes to the operating environment improve SOE performance, or was wholesale change of ownership necessary?” Raymond Parsons, deputy CEO of Business Unity SA, one of the 12 members, says that there may be scope for rationalization.

The 12-member review committee has been given a very clear mandate of 21 issues to investigate. One big challenge is to decide to what extent government should extend or reduce its role in managing the SOEs. They also need to answer some tricky questions relating to staff recruitment and remuneration, a current hot potato. Also on the agenda is the relationship and collaboration between ministries to achieve SOE objectives which are not working effectively.

Elaine Porteous is a contributing editor to SmartProcurement. Email her on

This article was compiled from the Financial Mail report dated October 22. 2010 and from Details of the brief to the review committee are found in:

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