ANC privatising Eskom and Transnet by accident

The ANC-led government is effectively privatising state-owned enterprises (SOEs) by making them too financially weak to provide the services they should. 

As a result of their financial weakness, brought about by decades of mismanagement, the government now has to open sectors that were once controlled by state monopolies to the private sector. 

This results in the effective privatisation of these sectors as weak SOEs are outcompeted by private players. Thus, the public company is not privatised and taken over by the private sector, but the industry is. 

Efficient Group chief economist Dawie Roodt explained this phenomenon, which he refers to as back-door or stealth privatisation of state assets. 

Roodt said this began years ago, with the root of the current privatisation by stealth beginning with the mismanagement of SOEs. 

“Another favour the ANC did us all is that they have basically destroyed the SOEs and by doing that, they have basically privatised all of them,” Roodt told State of the Nation. 

“They destroyed the whole thing at great cost and pain for South Africans in the form of lost capital and lost economic growth.”

This destruction has made these SOEs extremely weak financially and unable to engage in adequate investment to maintain or upgrade key infrastructure and deliver services. 

“Now, they are down and out and are finished and klaar. Now, it is the private sector stepping in to generate electricity and running harbours and airlines,” Roodt said. 

One of the clearest examples of this is the Post Office, whose functions have been effectively replaced by courier services and private mailing companies. 

The company itself was not taken over by private individuals or owners, but the industry is effectively dominated by private players. 

A similar situation has played out with South African Airlines, with private operators such as FlySafair, CemAir, Airlink, and Lift replacing it within the airline industry. 

Roodt explained that the same process is currently playing out with Eskom and Transnet, with the government’s reform agenda set to increase private participation in the electricity and logistics sectors. 

Reality overtakes ideology

Roodt explained that the ANC is largely enacting this reform agenda against its own will, with it being contrary to its political leanings. 

South Africa’s dominant political force remains committed to leading a highly interventionist government that controls a large part of the economy. 

“The ideology of the ANC is stuck somewhere in the 1920s. Their ideology is based on Karl Marx’s labour value theory, which does not apply anymore because the majority of people do not work in factories,” Roodt said.

“Flowing from their ideology are their various policies. These policies are based on things like expropriation, centralisation, and redistribution, rather than creation and expansion.”

This is the driving force behind the mismanagement of SOEs, with the government intervening consistently in how they are operated. 

However, Roodt said that things appear to be changing, with reality overtaking ideology for the ANC. The party realises what needs to be done to revive South Africa’s economy and it is finally doing it. 

“Listening to the Finance Minister and the President, they are making a lot of noise about private participation,” Roodt said. 

“That is something the ANC would never have done before. That is totally against the ideology of the ANC, but reality is overtaking ideology.” 

“The government is getting private participation in key sectors of the economy, and it is being encouraged for private players to work with SOEs through public-private partnerships.”

Roodt explained that if this is followed through to its conclusion, then South Africa’s economy can grow at a much faster rate than it currently is. 

However, this will be limited by the ANC’s destructive economic policies in other areas, which continue to be a drag on economic growth. 

“Expect some growth, but, unfortunately, the real change in the economy is not happening yet because of the wrong macroeconomic policies,” Roodt said. 

“The wrong macroeconomic policies are things like expropriation without compensation. Things like BEE and even the NHI scheme.” 

Roodt also pointed out the vital role that local governments have in driving better economic outcomes, as they are responsible for much of the country’s basic service delivery. 

“The local authorities are not functioning. The state-owned enterprises are dysfunctional and have been destroyed financially and operationally by the ANC,” Roodt said.