South Africa Should Explore State Asset Sales, Report Says

  • Analysis of government entities commissioned by President Zuma
  • Private sector could tackle weak finances, operational failure

South Africa should consider selling stakes in state-owned companies to private entities in order to improve their finances and tackle operational failures, a report commissioned by President Jacob Zuma shows.

Private-sector expertise could also be harnessed through direct partnerships, shows the report, which was compiled by an independent committee and published on the Presidency website on Friday. The government will “ensure the implementation of the recommendations,” Zuma said in his annual state of the national address on Feb. 11. State-owned companies “must be financially sound, be properly governed and managed,” Zuma said.

The heads of South Africa’s biggest companies urged Zuma to sell state-owned assets at a meeting on Feb. 9, one of a raft of proposals to try and avoid a credit downgrade to junk status. South African Airways, the national airline, and Eskom Holdings SOC Ltd., which supplies almost all the country’s electricity, are unprofitable and a drain on the fiscus.

Other recommendations made by the committee in the report include focusing on those state-owned companies that provide public goods or strengthen national security. The government could withdraw from industries that are already adequately served by the private sector and exit businesses that compete unsuccessfully against the non-government entities.

South Africa sold its 13.91 percent stake in mobile-phone company Vodacom Group Ltd. in July for about 25 billion rand ($1.6 billion) to raise funds for Eskom. The buyer was the state-owned Public Investment Corp., Africa’s largest money manager and administrator of government-worker pension funds.

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