Will a coalition government improve Eskom? Experts weigh in on the future of SOEs

The emergence of a coalition government in South Africa has raised questions about the stability of state-owned enterprises (SOEs), say experts.

Yugen Pillay, partner and head of public sector at BDO, an international public accounting, tax and advisory firm, said political parties forming a coalition government might lead to issues.

This is because their diverse ideologies and policies would need to work together.

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“That could stall future policies and decision-making because one political party will pull in one direction and the other in the opposite direction. And because there’s no centre road, policies don’t get implemented,” he said.

“We’ve seen that in local government where parties are in coalition but unfortunately can’t come to agreement on certain policies and procedures.”

Will SOEs benefit?

Pillay said there was a significant lack of accountability at SOEs.

Peter Baur from the School of Economics at the University of Johannesburg said there was uncertainty in the economy. He said a lot depended on how the coalition government would be structured.

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“The nature of the coalition could lead to a variety of possible outcomes on the management, reporting and expectations as per the services of the SOEs, especially those which may have a critical impact on the nature of the SA economy,” he said.

“Given the low economic growth, business and investor confidence, with challenges in job security and weak consumer confidence, the coalition faces pressure to devise effective strategies moving forward.”

But Victor Mashego, chair of the Mpumalanga Tourism and Parks Agency, believed a coalition government could be beneficial for SOEs.

Eskom could improve

He said since SOEs were entities of the state, changes in government should not significantly affect their operations.

“With a coalition government, Eskom’s efficiency might improve. This might bring transparency and rigour in the appointment processes for board members and CEOs of SOEs.

“This will force transparency and those in high positions to answer to the people. They will ensure SOEs perform to their optimum,” he said.

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Pillay stressed that coalition governments may have opposing views on policies and that it was “actually opportune to get private sector involved at SOEs right now”.

“What that means is government taking a step back from SOEs like Eskom and from the governance and running of the SOE. And bringing on a private sector partner which will ensure that the SOE is run in the way it should be run.”

‘Don’t interfere’

He said Eskom had to generate sufficient electricity and deliver it to people and their businesses.

“Not interfering with the corporate structure and corporate governance at these institutions is vital. It’s key that we turn them around in the shortest space of time because these SOEs are not in a good space.

“The challenge is immense because SOEs in themselves are the backbone of the economy. If you put the brakes on Transnet and Eskom, you will put the brakes on the South African economy,” said Pillay.