As the country grapples with the disastrous effects of the Covid-19 pandemic on its frail economy, the risk posed by inefficient state-owned enterprises has been significantly enhanced. Put together, the state guarantees R385-billion in debt for these entities.
This anomaly, he added, is rarely found in the private sector, but allows other agendas to dictate operations at SOEs. “When you’ve got a board at a state-owned company, and it’s got certain fiduciary responsibilities, it must be left alone to discharge them,” he said. SOEs, the organisation said, generate an average return on equity — a measure of efficiency that is calculated from profitability in relation to the cash it gets from its shareholders — of less than 0.2%. This average is well below the 5% their peers in other emerging markets generate.
“Once the ANC had created the hundreds and thousands of unsustainable jobs, it has made it possible for the trade unions and Cosatu to hold the ANC to ransom: both to force them to increase salaries way above market rates and to prevent the elimination of the unsustainable jobs,” he said. At the time of his departure, SAA’s turnaround strategy, which included restructuring that would have led to job losses, was approved, but efforts to implement were being second-guessed and hampered by the shareholder. In his resignation letter, Jarana said the lines of accountability between himself, the board and the shareholder were blurred and affected his work.
This is after the government failed to deliver on funding needed to restart operations and deliver on R14-billion worth of orders. “Our entities have a clear mandate to minimise job losses but without compromising the pressing need to create commercially viable and dynamic organisations that can stand on the strengths of their balance sheets. Their own revenue must match or exceed the costs.”
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