A state-owned holding company will house all the assets of state-owned companies (SOCs), replacing the department of public enterprises and cashing in on dividends declared on SOC profits once they have been turned around.
Details of how the company will operate were tabled at a meeting President Cyril Ramaphosa held with CEOs and SOC board chairs on Tuesday.
The changes will result in a huge shake-up of state-owned enterprises (SOEs) with the establishment of a State-Owned Holding Company before the end of this financial year.
The department of public enterprises (DPE) will fund its establishment. In addition, the state will pay for the turnaround of ailing state companies, including debt relief, before they are incorporated into the holding group.
This model has been copied from the Singapore SOC Temasek, Chinese State-owned Assets Supervision and Administration Commission of the State Council and Malaysia's Khazanh Nasional Berhad.
Insiders say five companies will immediately fall under the company — Sentech, Safcol, the Industrial Development Corporation, the Development Bank of Southern Africa, and a soon to be established Property Company. This will take over the properties owned by state-owned companies such as Eskom and Transnet.
The establishment is said to be awaiting cabinet approval.
Eskom, Transnet, Sanral, Denel, SABC and others are expected to be added in a second phase as they do not yet meet the requirements.
According to insiders, the government is projecting that the company will be profitable as soon as it is established.
“The consolidated group will be profitable from 2023. HoldCo will generate small profit from 2023,” the Presidential State-Owned Enterprise Council (PSEC) said in its presentation.
“The pro forma HoldCo and consolidated balance sheets are to be solvent and liquid from the onset.”
Most of the initial profit, according to the PSEC, will come from the property company investment portfolio.
It also suggested that the company “can raise funding through the sale of interests in entities to be classified as associates or investments”.
These, according to information the Sunday Times has received, are Alexkor and the African Exploration Mining and Finance Corporation.
The PSEC is said to have also suggested that the state will have to provide further bailouts for some of the SOEs and fund their restructuring costs.
In turn, the dividends that will be declared by the SOEs in the company will then be paid to the state.
“Initial seed funding has been made available by DPE to cover HoldCo’s set-up costs,” said the PSEC.
“HoldCo will be adequately resourced maintaining a lean structure to ensure that it delivers on its purposes and objectives per the MOI [memorandum of incorporation].”
The PSEC told Ramaphosa that most of the SOEs were “not financially viable and fit for purpose” and that they required “special intervention”.
There were certain parts of some that were not considered strategic and “will require restructuring”.
It added that most of the country’s SOEs “were not ready to be transferred” to the holding company on day one.
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