Charting a new course for failing state-owned enterprises

The NDP (National Development Plan) envisages a poverty-free and a more equal South Africa by 2030. The realisation of this vision rests heavily on well-functioning SOEs because they are the backbone of the economy.

However, as it stands, SOEs are not only dysfunctional but they are also failing to meet their developmental mandate. The outcomes of their failings are extensively documented. But lesser known are the root causes of these manifestations. Why are our entities failing? Even rarer still is the evidence base to support those arguments.

Genesis worked with the National Planning Commission, a nucleus government advisory agency, to assess SOE performance and contribution to achieving the NDP’s Vision 2030 of economic transformation and inclusive growth.

Our study addressed three main questions:

• How are SOEs performing? We mapped their detailed performance, pointed out the areas of underperformance and outlined the expected level of delivery to meet the NDP’s objectives.
• When is an SOE necessary? Looking at the market structure, what is the form of intervention that best supports proper functioning? This aims to shift the debate from the false dichotomy of privatisation vs nationalisation.
• Finally, what is the best governance structure to protect SOEs from excessive political interference, poor governance and patronage?

Our aim was to provide a logical and evidence-based input that will assist policy makers in their deliberations on SOEs. In a highly polarised and politicised debate, where the stakes are the nation’s development and society’s transformation, injecting neutral data and rational analyses is vital.

A multidisciplinary team from Genesis, local experts, and international experts worked for more than a year, producing four papers on performance, structural and institutional reform options.

We proposed a number of recommendations on channels for course correction, as well as various tools to continue to monitor performance and assess market structure.

Our recommendations were released in June 2020 as an official NPC position paper, which can be found here.