Privatise all the parastatals

The continued failings of South Africa’s plethora of state-owned enterprises (SOEs) have been widely documented. NICHOLAS WOODE-SMITH believes there is a simple solution: privatise them all.

 Eskom, Transnet, the South African Broadcasting Commission (SABC) and South African Airways (SAA) are the usual bunch that bear the brunt of our much-deserved derision, but they aren’t the only SOEs burning a hole in the taxpayers’ pockets. There are hundreds in South Africa, most with a less than stellar reputation, balance sheet or performance. Even those that do perform well seldom have a business being run by the government.

A government’s job isn’t to own or run companies. It isn’t to manufacture goods or run a commercial enterprise. A government’s job is to create and maintain the institutions in which a society can be stable and secure – police, courts, the military – and to provide a consistent set of unobtrusive laws that govern how we interact with one another.

It is not the job of the government to try to make money, and it is certainly not the job of the government to spend lavishly on projects that it has no business running.

Of those hundreds of SOEs that exist across different schedules and categories, this analysis will focus on just a few. Notable amongst these are the heavy-hitters (and big losers) mentioned at the top of the article.

Joining them is the Passenger Rail Agency of South Africa (PRASA), which faces a vandalised and heavily damaged railway network on top of billions being spent on inappropriate trains. Denel, a once prestigious arms manufacturer, was gutted by state capture and skills attrition. The South African Post Office (SAPO), meanwhile, has suffered from mismanagement, serves a drastically irrelevant function and has required multiple bailouts.

Neither should other, less famous, examples be forgotten. Diamond miner Alexkor struggles to churn a profit while being embroiled in constant corruption scandals; PetroSA is marred by governance issues and corrupt tenders.

The financial inadequacy of these failing SOEs has, according to the Centre For Development and Enterprise (CDE), cost approximately R2 trillion in economic output since 2010, while receiving close to R400 billion in bailouts. In 2024/25 alone, SOEs cost the fiscus R109 billion in bailouts, capital support, subsidies and debt relief. While it hasn’t been paid yet, the state guarantees R491.9 billion to public institutions. That means if these SOEs can’t pay their debts, the taxpayer foots the bill.

These numbers cannot truly count the immense toll that continued mismanagement of some of these crucial SOEs place on the economy. Loadshedding led to major contractions in the economy, while forcing businesses to invest in inefficient personal generators rather than being able to rely on a grid benefiting from economy of scale. Transnet continues to run our key commercial infrastructure into the ground.

Even arguably successful SOEs may be causing more harm than good. SANParks runs a generally profitable balance sheet, backed with donor support and prestigious parks like Kruger, but its sole mandate and monopoly over swathes of South Africa’s land holds back private competitors who may arguably do a better job at conservation and job creation (if given the chance).

Of the few dozen SOEs that I have analysed, almost all could hypothetically be privatised; at least a third face hefty financial trouble; and over two-thirds are facing corruption scandals or have been accused of mismanagement. We need to privatise the lion’s share of our SOEs. But how should we decide what stays or goes?

First, we must ask whether they serve a crucial function. For instance, we need electricity, so a power utility must exist. But there isn’t an inalienable need for a broadcasting company like the SABC – public or private.

Second, can the enterprise generate a profit? If so, it should be privatised. Profit-making is not a government prerogative. If it can sustain itself, then it should be private. If it can’t sustain itself financially but is still a necessity – for instance, a strategic highway that is far from a commercial hub – then it can still hypothetically be made independent of government while receiving a closely monitored subsidy, as is the case for the South African Reserve Bank. This at least shields it from much of the corruption and political meddling inherent in government.

But the core goal of privatisation is to save the taxpayer money, while handing over a function to a more responsible, more capable actor. This process of privatisation must be accompanied by deregulation and de-monopolisation. There is no point privatising Eskom only to sell it to a private monopoly. At their core, monopolies suffer from similar maladies to the government – especially if their monopoly is mandated by regulation.

It is time to abolish regulations that create these state-monopolies, then de-bundle the SOEs into their physical assets. No single company should be able to purchase all power plants or transmission infrastructure. This entire process needs to be conducted as transparently as possible. The process by which bidders purchase SOE assets must be public, so that citizens can scrutinise every transaction.

We can save the country billions, while putting SOEs in the hands of real South Africans rather than government cadres. Privatisation is just one step towards making this country prosperous and free.

* This article has been edited for content and style. The original version was first published by Rational Standard in September 2025.