International state-owned enterprise (SOE) case studies

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Public Enterprises

30 September 2022
Chairperson: Mr K Magaxa (ANC)
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Meeting Summary

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The Committee received a briefing from the Committee Researcher on international state-owned enterprise (SOE) case studies. It also discussed whether the Committee should conduct an international study tour.

The presentation provided a case study of South Korea, India, Malaysia and the Philippines. The following observations were made:
- SOE reform should ideally be driven by the Head of the country
- SOEs are seen as a vehicle for economic development and attaining national outcomes
- Define what an SOE is and classify them accordingly
- Consider the scope of the proposed legislation
- Reporting lines need to be considered and the devolution of power
- SOE reforms should be reported and overseen at a high political level.

Committee members suggested that the tour should be conducted in November or February before the State of the Nation Address (SONA). Some concerns raised by Members were that the situation in other countries is not as severe as in South Africa and when study tours are conducted, the recommendations are never implemented by government. It is important not to waste taxpayers' money when the Committee goes on expensive study tours. Members, therefore, called for the Committee to strengthen pressure on the executive and Parliament to effect implementation of recommendations from study tours.

The Committee Oversight Visit Report to Eskom, SAA, South African Express, Denel was also adopted.

Meeting report

Committee Oversight Visit Report to Eskom, SAA, South African Express, Denel

The Committee Secretary, Mr Disang Mocumi, went through the oversight visit report which was adopted. The Committee also adopted the minutes from the previous meeting

International state-owned enterprise (SOE) case studies
Ms Lee Bramwell, Committee Researcher, presented international case studies on SOEs in South Korea, India, Malaysia and the Philippines to assist the Committee in deciding whether to embark on a study tour.

South Korea has used its Act on the Management of Public Institutions (AMPI) since 2005. There is a devolution of power from line ministries, including the Economic Planning Board and the board of directors and executives. The classification of SOEs / public institutions was highlighted. Prescribed governance structures are according to classifications. There are limits on the rights of the line ministry to intervene in the management of SOEs. The Committee on the Management of Public Institutions appoints directors.

In Malaysia, the Government-Linked Companies (GLC) Transformation Programme aims to transform GLCs into high-performance entities to accelerate the country’s social and economic development. The establishment of the Putrajaya Committee on GLC High Performance (PCG) drives the delivery of the GLC Transformation Programme, chaired by the Prime Minister. The PCG design, implement and oversee policies to transform GLCs into high-performing companies and establish the framework to program-manage and oversee the implementation of the Transformation initiatives.

The Philippines has the Government-Owned and Controlled Corporations (GOCC) Governance Act of 2011. The Governance Commission for GOCCs (GCG) is the central advisory, oversight, and monitoring body with authority to formulate and implement policies in the active exercise of the state’s ownership rights, to ensure GOCC financial viability and fiscal discipline through adherence to the highest standards of corporate governance. The GCG classifies the GOCC, establishes performance evaluation systems, coordinates and monitors GOCC operations, reviews their functions, makes recommendations on corrections or alignment with regulatory and commercial functions, and recommends suitable candidates for directors. The GCG is situated in the Office of the President

In India, the Statement of Industrial Policy of 1991, including the Public Sector Policy, improves performance through the Memorandum of Understanding (MoU) system allowing management greater autonomy and accountability. The National Common Minimum Programme (NCMP) policy toward Public Sector Enterprises defines the government’s aims. The government adopted the Corporate Governance Code formulated by the Securities and Exchange Board of India. The classification of enterprises determines the degree of autonomy of Public Sector Enterprises. The Department of Public Enterprises acts as a nodal agency for all PSEs and assists in policy formulation on the role of PSEs in the economy and lays down policy guidelines on performance improvement and evaluation, financial accounting, personnel management and related areas.

The observations made from the case studies:
- SOE reform should ideally be driven by the Head of the country
- SOEs are seen as a vehicle for economic development and attaining national outcomes
- Define what an SOE is and classify them accordingly
- Consider the scope of the proposed legislation
- Reporting lines need to be considered and the devolution of power
- SOE reforms should be reported and overseen at a high political level.

Discussion:
The  Chairperson asked Members to provide input to gain perspective on which country is the most desirable to mirror for the challenges faced in South Africa.

Ms J Tshabalala (ANC) asked for the dates proposed for the study tour. It is important to communicate with the Chair of Chairs, Mr Frolick, on how important the issue is. She suggested that the Committee should consider November or February before the SONA takes place. It is important that the Committee is able to come back to Parliament and give recommendations on the SOEs. Every time interaction occurs, recommendations are made but it is not taken seriously by the SOEs. She suggested that Parliament should be employed in effecting the recommendations.

Mr S Gumede (ANC) said that it is true that South Africa can learn from other countries.  However, the situation at hand is non-comparable. These affluent countries do not face a state capture situation. SA is not financially viable to adopt some of the strategies of other countries. The willingness of all the entities involved including National Treasury, the boards, and CEOs, will determine if a study tour should be conducted. How prepared are people to practice and test the things learned? The Committee previously went to Brazil to study food consumption and waste and strategies were decided upon but it has never taken off. Commitment from the different entities is required.

Mr N Kwankwa (UDM) said that Ms Tshabalala and Mr Gumede hit the nail on the head. In instances such as these, where committees undertake study tours, especially on SOEs, it is important that whether it is through the Chair of Chairs or the National Assembly Speaker that when there is a failure on the part of entities, the executive takes up the fight on behalf on the Committee. It is important not to waste taxpayers' money when the Committee goes on expensive study tours. It is not only the different entities that fail to implement but Parliament too. In 2018,  when Jackson Mthembu was the Chief Whip, the Committee visited Ghana but it did not implement the recommendations developed. More urgency is required in implementing recommendations.

The Chairperson said that it is the Committee’s responsibility to do oversight and the executive’s responsibility to implement.

Mr N Dlamini (ANC) said that the situation in South Africa is different and man-made. Some call it state capture but it should be called theft. The situation led to the decision not to fund SOEs anymore and SOEs are therefore suffocating. He recommended that the Committee should conduct the study tour to strengthen SA’s system and revive the SOEs. Making the executive accountable for recommendations forms part of the Committee’s work and doing so will not be too far-fetched.

Ms Tshabalala said that there are three arms of the state and the Committee is the legislature. The Committee should not feel helpless because the reason for going on the study tour is important. The Committee should therefore hold Parliament accountable.

Ms Bramwell pointed out that some countries also had collusion where the state and the public enterprises worked together to make their companies bigger when they did not have the money and did not actually need to. There was corruption as well, specifically in South Korea within the SOEs. Other countries do have corruption and collusion with the SOEs.

The Chairperson asked the Committee Secretary if the Committee could decide on a target date to embark on the study tour, either November or February as suggested.

Ms Bramwell said that the Committee Secretary informed her that the 4th quarter programme for Parliament had not been circulated yet so he had no specific dates available yet. Once the programme has been circulated, the study tour date can be decided upon.

Mr F Essack (DA) alerted the Committee to the tabling of the Medium Term Budget Policy Statement in Parliament on 26 October 2022. The programme is already tight and therefore the Chairperson needs to interrogate this and make the best decision for the Committee.

The Chairperson said that the Committee would decide on a date when the Committee returns from recess.

The meeting was adjourned

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