Damned if you do; damned if you don't.


The pace of privatisation in South Africa has been slow and grudging. On the one hand, the government is keen to raise as much cash as it can through the sale of public assets; on the other, social and political pressures are working against the move.

The bottom line in South Africa's privatisation programme is disappointing. If delivery is measured against promise, the results are in the red. Of the 16 state corporations to come under the hammer, just two, a small airline and a minority slice in a communications provider, actually changed hands -- and there's no guarantee that 1998 will see the pace increase.

During 1997, the domestic route airline, Sun Air, was sold into private hands in a deal that was widely criticised as being hasty and undervalued. It was as a result of pressure on the government wanting to be seen as starting the privatisation process that the deal was concluded quickly. Public Enterprise Minister, Ms Stella Sigcau, however, is happy with the R100m return and contends that it would be unreasonable to expect much more.

Communications company Telkom sold 30% of its equity to the American Southern Bell telephone company and Malaysian interests in a sale that netted just over R5bn.

In the wings, waiting for their cue to come onstage, are a plethora of other government interests (see box).

In the opinion of Mr Jac Laubscher, chief economist of Sanlam Asset Management, the momentum of the privatisation drive largely disappeared after the introduction of a strategic equity partner into Telkom. "Government is still too concerned with maintaining control of the enterprises involved," he maintains. This view is widely held by South African business, opposition politics (and perhaps covertly in certain government quarters), the financial community, and equity investors at home and abroad.

Ms Sarah Scheijde, manager of privatisation at Standard Corporate and Merchant Bank, on the other hand, is more optimistic. "In many respects the process is moving forward remarkably fast," she says. "Much needed discussion and consultation has taken place."

However, the ground to be covered is shaky in many places. Certain parastatals earmarked for restructuring, such as SAFCOL, have found themselves in a state of limbo. Day to day decisions are becoming increasingly difficult and this may impose negatively on the ultimate value of the company.

"It is essential that clarity be obtained over their future owner structure soon so that these companies can move forward confidently," Ms Scheijde maintains. "South Africa must understand that it has to fight for inward investment and that investors have a number of attractive alternatives in the emerging markets. Careful management of expectations is crucial to the success of the process."

Mr Richard Lloyd, an adviser to the European Bank for Reconstruction and Development maintains that there is huge scope for privatisation in South Africa, and that it could be the route to encouraging greater foreign investment. "Portfolio investors want small stakes in large quoted companies with quality assured. Venture capitalists look for high cash flow, minority stakes after privatisation, highly motivated managers, predictable corporate governance, and a way out," he says.

It's a prickly damned-if-you-do, damned-if-you-don't situation for the Minister in charge of the privatisation programme, Ms Stella Sigcau, and her team, as well as for top-tier government who are looking to the sell-off to underwrite a significant portion of the government's much vaunted economic recovery programme GEAR (growth, employment and reconstruction).

Ms Sigcau has pointed out more than once that privatisation "is a process, not an event." It is her view that selling-off state property is not a one-day garage sale to which browsers can come along to pick and choose and haggle over the price. It is a process, she insists, that carries with it heavy responsibilities -- to the government, and to the people of South Africa. It must increase the number of stakeholders and owners in the South African economy, promote empowerment, enhance fair competitiveness, facilitate growth and help to achieve the basic needs of the people and the objectives of the RDP.

Delays, real or imagined, says the minister, reflect the government's concern that all stakeholders are consulted. "As far as the restructuring programme is concerned, government's central and overriding objective is to restructure the state-owned sector into a series of efficient, well-managed and financially independent companies capable of providing goods and services at affordable prices to all South Africans, particularly the previously disadvantaged."

Labour's role is obscure

As the process of privatisation in whatever guise continues to unfold, labour's part in it becomes increasingly obscure and often impossible to predict. And that's because the unions are increasingly finding themselves in a retroactive role -- reacting to situations, without having a clear stance of their own.

What tends to stir up the mud in the water even further is labour's increasing interest in the equity market as a source of wealth creation for its members. This cosying up to...

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