A key reason for South Africa’s exceptionally low growth rates over the past decade and a half has been the ongoing operational and financial crises that have characterised large state-owned enterprises (SOEs).

The performance of the major SOEs since 2009 has been disastrous. South Africa missed out on around R2-trillion in output between 2011 and 2020 solely because of the declining productivity of key network industries. Updated to 2024, that figure may equate to over R4-trillion in current rands. More than R330-billion was spent on SOE bailouts between 2008 and 2021, a figure that excludes the transfer of debt of R254-billion from Eskom to the state since then.

CDE’s new report, ACTION SIX: Solve the SOE challenge argues that the parlous state of our SOEs is not merely the result of bad governance. What needs to be recognised is that bad governance is enabled by the SOEs’ status as protected monopolies – there are no consequences for poor performance since these firms do not have to compete for business.

The report argues that a focus on strengthening the competitive pressures on SOEs like Transnet and Eskom will drive a more coherent reform programme than what is currently in place. Competitive pressures will constrain costs and maximise efficiency in service provision.

Specific recommendations on increasing the role of competition between service providers to discipline SOEs and incentivising them to improve and develop sustainable solutions are outlined in the report.

Report by the Centre for Development and Enterprise