JERIMIAH KLAAS | To privatise or not to privatise? That is the question

If you’re a unionist you’d most likely prefer state ownership as that could translate to better stakeholder management dynamics where your members and the terms of their remuneration are concerned, having the government as the employer. A capitalist would most likely choose privatisation because in many cases the opening up of a government function or unit for private participation has the potential of more economic benefits for private players.The aim here is not to argue whether privatisation is good or bad. Instead  let us consider how as a country we can come to a determination that privatisation is or is not the solution.

The topic of privatisation is always preceded by a discussion on the failure of state-owned companies to perform at optimum levels. Take for instance Eskom. Many people have been calling for itsprivatisation because of mismanagement, corruption, poor governance and delivery inefficiencies that have plagued it for almost 15 years or more. Is that a legitimate reason for privatisation ? Privatisation on those grounds alone would mean almost all government companies could be candidates for privatisation, especially most municipalities.

When we call for privatisation because there is mismanagement, corruption, nepotism and lack of skilled management and leadership we create an environment where there's no accountability to those in charge. . We do not fix government problems by shifting them to private hands.

Part of the solution could be political leadership and oversight adjustments and hiring suitable executive and management teams with the appropriate skills for the job and giving them the resources they need.

We should have privatisation guidelines that we can follow to make sound decisions about privatisation. These guidelines would look carefully at questions about the country’s security and integrity. For example, that no matter how our defense department fails we simply cannot privatise it with the hope thatprivate players would make it work. The strategic importance of the government unit will need to be thoroughly assessed. What would happen if local buyers sell this strategic asset to international players later and leave the country weakened in that area?

The guidelines need to investigate if part of the problem affecting government entities isspecialised skills  how to rope them in to manage the process of fixing the entity.

For government  to secure financial resources, we  could always put to good use some of the interest from investments managed by the Public Investment Corporation to aid where the government unit has financial shortfalls as mandated by the privatisation guidelines.

It could also be that government processes and policies are the ones that making it difficult for the government entity to deliver serviceso. That ought to be looked into and changed where possible through changing legislation.

These guidelines could assist in identifying whether or not the private sector has the capacity to manage the vacuum that the government entity would be creating. The argument here is that we need more tools to assess private capital’s readiness to lead in some sectors. We need to ask tough questions such as: will the industry be transformed once private capital enters, allowing blacks to participate? Will this not result in an oligopoly that leaves consumers worse off due to unwarranted price hikes?

During Covid-19 it took the intervention of the Competition Commission to rein in on some of the giant retailers and regulate some of the prices for essential goods and the fining of some due to excessive pricing of face masks. Every now and again we hear about some companies not adhering to environmental regulations. We cannot therefore just pronounce that privatisation is a panacea for failing government entities. Privatisation comes with its own challenges. The private sector in many cases has shown it cannot self-correct and requires the intervention of regulators to bring balance and fairness. Consequently, I take the view that we cannot blindly privatise without satisfying ourselves that it is indeed the only logical direction to take on a case-by-case basis at that specific point in time.

We deserve a well thought-out and systematic process that will guide us on future decisions on privatisation.

*Klaas is executive director of Waterrmelon (Automotive Tech System)