SOEs must ‘cut costs, ramp up productivity to save credit rating’

Cutting costs and ramping up the productivity levels of the state-owned enterprises (SOEs) is the only way SA can counter its negative credit rating, a top business leader has advised.

IT accounting group Osidon chief executive Hennie Ferreira said the biggest obstacle to turning around the country’s negative credit rating was its debt, which was mostly caused by struggling SOEs.

He cited the example of Eskom which this week hired new CEO Andre de Ruyter from the private sector, which Ferreira said looked promising.

“Unfortunately, job and salary cuts will probably be part of the plan to turn [it] around. The biggest factor will be labour unions – as we can see with the current situation at SAA,” Ferreira said.

Moody’s has changed its outlook to negative and yesterday S&P was expected to release its ratings.

Ferreira believed: “The only way to turn the negative credit rating around is to turn around SOEs by drastically cutting costs and [ramping up] productivity levels,” he said.

Foreign investors use the reports of the rating agencies to make investment decisions. But with negative outlook, many economists believe that’s an omen for a junk status declaration.

“We need to position SA as a favourable investment destination by cutting red tape and deregulating the business environment.

“Investors are looking towards Africa and we have the potential to become an ‘investment paradise’. No other country in Africa can offer what we do as an investment destination,” Ferreira said.

He said SOEs, just like small businesses, must embrace change and technology to increase productivity and efficiency.

“We no longer have an option … technology has become an integral part of all industries in SA.”

Technology should not be equated to job losses – because of technology, new industries are created and new skill sets required.

He emphasised that training was fundamental to success. The private sector was just as responsible for training their employees as government is.

Osidon introduced the world’s first online digital accountant, aimed at helping small, medium and micro enterprises and entrepreneurs, and paving the way for job creation and increased compliance with the SA Revenue Service system.

– ericn@citizen.co.za

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