State-owned companies were hampered by state collections, "which in simple English would be referred to as fraud and corruption," said Minister Nhlanhla Nene of Finance.
Nene, who spoke to the National Council of Provinces on tackling the administrative challenges in these companies on Tuesday, said that "several government initiatives are underway aimed at restoring the capacity of state enterprises to fulfill their mandate".
Recommendations made by the presidential state-owned state-commission assessment committee, Nene said that the key challenges that led to poor performance by state-owned companies included weak balance sheets, poor financial performance, management errors and inadequate mechanisms to enforce accountability.
He mentioned the following initiatives aimed at restoring the capacity of state-owned enterprises:
A framework for private sector participation
Nene said that this framework "provides alternative financing strategies to enable infrastructure investments and to highlight considerations [state-owned companies] work with private sector companies to enable faster and more efficient delivery of goods, services and economic infrastructure to support the country's higher economic growth ambitions and economic transformation goals ".
One of the starting points for determining the private sector participation projects is a governance framework for the government to monitor its implementation.
He said that the framework was formed in consultation with important departments such as economic development, public companies, transport, energy, water and sanitation, and telecommunications and postal services.
Cost price calculation of development mandates
The minister said that many poorly performing state-owned companies claimed that development activities contributed to their poor financial performance.
"In this respect, it has become important that the costs associated with the development activities are clearly specified and that these generate external benefits without compromising the financial sustainability of the entity.
"State-owned companies are obliged to identify activities, quantify the net cost of the activity and calculate the net present value using a certain return.When activities have a negative net present value and they are strategic and development-oriented, tax support can be considered ", he said.
Framework for the appointment of administrative bodies of the management of the members fees of members of managers
Under the guidance of the minister for public service and administration, Nene said that the government has developed the following framework:
• An assessment of the requirements of minimum qualifications for potential candidates;
• An assessment of the methodology for processing management appointments and their submission to the Cabinet;
• An assessment of the number of signs that each person may use at any time;
• The appointment of executive authorities with strategic boards; and
• The developing guidelines regarding the level of security clearances for management appointments.
He said that this framework should be aligned with the compensation framework – for both guaranteed packages and short-term incentives – for boards of state enterprises and executive management.
"Successful implementation of these measures requires close coordination within the government and effective collaboration with the private sector," Nene said.