The South African government should sell some state companies to improve
public finances which have been hit by a weak economy, a privatisation
team commissioned by President Jacob Zuma has recommended.
The team’s report, released over the weekend, did not mention any
companies. Analysts said any sales would probably be smaller companies
and not struggling power utility Eskom or national carrier South African
Airways.
Many of South Africa’s 300-odd state entities are a drain on the
government’s purse. If Zuma’s government were to adopt the
recommendation, it would mark a departure from the ruling African
National Congress’s stance since coming into power in 1994, that state
companies should not be sold off.
The report, released over the weekend, said “governance, ownership
policy and oversight systems were found to be inadequate” in state-owned
companies and recommended the government sell underperforming companies
either fully or partially.
Zuma, in his annual state of the nation speech last week, said the
government needed to tighten its belt in the face of a weak economy,
which has been hit by a global slump in commodities and by power cuts
due to an inefficient power sector, but analysts said it was unlikely to
sell key state assets.
“It needs to be taken with a very large pinch of salt,” Nomura
International’s emerging market economist Peter Attard Montalto said of
the report. “It will apply mostly to smaller parastatals and is unlikely
to shift the dial on Eskom.”
Analysts have frequently said that cash-strapped Eskom , which was
granted 20 billion rand ($1.27 billion) to refurbish aging power plants,
and loss-making South African Airways should be privatised.
In July the government sold off its stake in mobile phone firm
Vodacom at a 10 percent discount to market prices to raise money for
Eskom.
Source: Newsday
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