New bill could create ‘super state firm’


On Friday, the civil rights organization AfriForum submitted written comments on the draft bill on National State Enterprises, which seeks to create a controlling company that will replace the department of public enterprises. A new state holding company will take over this department’s management of state entities and make the state the sole shareholder.

“The bill is expected to transform the management of strategic state entities by increasing the potential political influence. As has been seen in the past, unchecked executive authority in South Africa is prone to unlimited abuse,” said Charné Mostert, campaign officer at AfriForum.

In its submission, AfriForum sets out four cardinal arguments against the draft bill. Firstly, AfriForum has serious reservations about the proposed holding company, State Asset Management SOC Ltd, and fears that it may compromise accountability and the separation of powers. In addition, AfriForum argues that the bill misses an opportunity for privatization and prolongs the economic burden of failing state enterprises. In the third place, AfriForum maintains that potential benefits are being overlooked, as the proposed legislation puts centralized state decision-making above a decentralized approach and increased efficiency. Finally, AfriForum is of the opinion that the proposed bill may increase the risk for corruption, state capture and cadre deployment in state enterprises.

According to Mostert, the current bill does not adequately serve the public interest. “Legislation must be created that really serves the interests of the South African public. It is indispensable in the effective promotion of state enterprises. State-owned enterprises cannot continue to be a political arena for public servants’ looting.”

She says the current bill opens the door to mismanagement, favoritism and decisions motivated by political opportunism rather than public interest.

AfriForum maintains that an end must be put to state enterprises, given the history of mismanagement, corruption and inefficiency that afflicts many of these entities. Privatization of these enterprises will introduce market-driven efficiency and accountability. “However, it is unlikely that the ANC will privatize these enterprises at this stage and therefore AfriForum proposes, among other things, the mandatory disclosure of the political affiliation of board members in state enterprises,” says Mostert.