Ramaphosa ready for tough choices on ailing SOEs

President Cyril Ramaphosa said he is ready to make tough decisions over the future of South Africa’s struggling state-owned companies after placing the national airline into a local form of bankruptcy protection last week.

“Business rescue is not the preferred option for fixing our state-owned enterprises, nor would it be necessarily advisable in other circumstances,” Ramaphosa wrote in his weekly open letter to the country. “But the resolve we have shown in putting South African Airways into business rescue cuts across all key state-owned enterprises. We are taking all necessary measure to turn them around.”

The main task facing the government is to reduce the financial dependence the companies have on the state, and as a result, any further financial support will come with “strict conditions” designed to promote sustainability and self-sufficiency, Ramaphosa said. 

Read: Bye bye SAA

“We are clear that the state will retain ownership of all those state-owned entities that are strategic,” the president said. Where necessary, South Africa will seek strategic equity partners to help raise capital, source skills and technology, and improve efficiency, he said.

SAA has posted losses since 2012 as it grappled with the high operating costs of an aging, inefficient jet fleet and a bloated workforce, on top of high taxes, political interference and corruption scandals. State-owned power utility Eskom has to rely on state bailouts to continue operating, while the government-controlled national broadcaster is also among firms battling to survive.

“Despite the depth of the current challenges, none of our state-owned entities is lost. They can be saved,” Ramaphosa said. “But it will take extraordinary effort, and in some cases, tough decisions.”

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