ACTION SIX: Solve the SOE challenge
- ACTION SIX: Solve the SOE challenge is the sixth report in CDE’s AGENDA 2024: Priorities for South Africa’s new government series
- A key reason for South Africa’s exceptionally low growth rates over the past decade and a half has been the ongoing operational and financial crises that have characterised large state-owned enterprises (SOEs).
- South Africa missed out on around R2 trillion in output between 2011 and 2020 solely because of the declining productivity of key network industries. Updated to 2024, that figure may equate to over R4 trillion in current rands.
- More than R330 billion was spent on SOE bailouts between 2008 and 2021, a figure that excludes the transfer of debt of R254 billion from Eskom to the state since then.
- Many of the challenges in the SOE sector should be seen as at least the indirect consequence of the SOEs’ existence as legally protected monopolies. This shields them from the competitive pressures that would force them (and their shareholder) to behave differently.
- While detailed and specific recommendations for reform are required for each of the major SOEs, the general approach must be to increase the role of competition between service providers to discipline SOEs, so they are incentivised to improve and develop their sustainable solutions.
