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State-owned enterprises vs private South African companies – the winner is clear



New Minister of Finance Tito Mboweni has been tasked with fixing an economy that is in a terrible shape.

South Africa has suffered recessions, and unemployment rates continue to climb as there seems to be a respite for the average South African.

Mboweni and president Cyril Ramaphosa have a great deal of money, they will have to deal with our money-draining state-owned enterprises.

Bailouts for SOEs

After his appointment was his R5-billion bailout for SAA, as well as a bailout R2.9-billion for the SA Post Office.

This frustrated many South Africans decision is due to these organizations' reputation for incurring repeated, heavy losses.

I have noted that many state-owned companies need to be reconfigured, highlighting what SOE that needs "radical measures" to be taken.

Ramaphosa has also criticized SOEs, calling them sewers of corruption.

Recently, SAA’s interim CFO of Deon Fredericks said that companies are engaged in contracts with SAA cutting their settlement terms from 21 days to 7.

This is seemingly an uncontrollable supplier of money before any possible SAA financial collapse.

SAA is also struggling to pay R5 billion, which is before the end of November.

Even if this payment is made, SAA will have to find another R9.2 billion short-term loans by the end of March 2019.

When I face a R3.5 billion cash shortfall in the same period, adding to its long list of woes.

"The problem with turning around is that the board has to be continuously focused on issues that are more than getting on with the operational plan," said Fredericks.

Privatization of public services

Democratic Alliance leader Mmusi Maimane has previously called for the privatisation of poorly-performing SOEs, arguing that privatizing SOEs will introduce competition in key industries.

This sentiment has been echoed by economists such as Azar Jammine, who said SA failure to generate profit since 2011 is a reason it should be privatized.

There are, however, already operate private businesses in competition with SOEs.

Here is how they compare to their government-run equivalents.


Airlines

SAA is South Africa's dominant airline, leaving little rooms for competition due to their government backing.

Comair provides competition through its brand Kulula.com, British Airways as well as through operating domestic flights.

SAA suffered a net loss of R5.7 billion in its previous financial year. The national airline also owes entities R16.4 billion, R5 billion of which has been settled with your tax money by the government.

In comparison, Comeback has increased in net profits, with its 2017/18 profit coming in over R325 million.

Airlines
AirwaySOE or PrivateProfit / Loss
SAASOER5.7 billion loss
ComairPrivateR325 million profit

Telecommunications

Broadband Infraco is an SEO sector that provides long distance network infrastructure.

The latest available report on the national government website is for the 2016/17 period. In this time, Broadband Infraco suffered a loss of R125 million.

In contrast, South Africa's private telecommunications giants achieved much better results.

Both of South Africa's dominant mobile networks – Vodacom and MTN – posted profits.

Telecommunications
Network ProviderSOE or PrivateProfit / Loss
Infraco BroadbandSOER125 million loss
VodacomPrivateR15 billion profit
MTNPrivateR4.5 billion profit

Broadcasting

The SABC is South Africa's state-owned broadcaster. Alongside its free-to-air television channels, it also operates in such as radio broadcasting areas.

For the 2017/18 financial year, the SABC suffered a loss of R622 million-citing advertiser cut-backs, a decline in audience numbers, and tough economic conditions.

MultiChoice is a leading private South African broadcasting company, and its flagship products are popular paid video services DStv and Showmax.

Broadcasting
BroadcasterSOE or PrivateProfit / Loss
SABCSOER622 million loss
MultiChoicePrivateR8 billion profit

Now read: See how much Eskom money and SAA lose every second


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