Project Case Study
Supporting the restructuring of state-owned enterprises in South Africa
Providing institutional support to wide reforms within the South African utility market
Like many other African countries, there has historically been a strong state presence in South Africa’s infrastructure sector. In the years following the end of apartheid, however, the South African government was keen to leverage the huge economic benefits that other countries had seen from introducing private sector capital and efficiency to previously state-run companies.
South Africa’s utility market is unique in that it is dramatically split between the high-end provision often compared to that found in European economies, and the provision of services to the impoverished areas of the country, which is of a much lower standard. The country has experienced a massive drive to redistribute wealth to those who were previously disadvantaged and black economic empowerment groups are prominent. Any restructuring activities had to occur within these parameters.
In 2002, we were contracted by the Department for International Development to support South Africa’s main privatisation agency, the Department of Public Enterprises, as it sought to implement the government’s privatisation plan. We worked across the utility sectors, including with ESKOM, South Africa’s electricity supplier, South African Airways and Transnet, the country’s transportation provider, amongst others. We recommended new, competitive market structures and evaluated the companies’ own programmes for restructuring.
We focused on regulatory reform of the utility sector, for example introducing two pieces of legislation in 2006 for ICASA, the telecommunications regulator, one of which (the ICASA Amendment Act) focused on improving competition. The other (the Electronics Communications Act) broadens the scope for licensing. We also implemented incentive-based regulation, improved licensing, tariff strategy and the regulation of distribution in NERSA, the electricity regulator.
Working with the Department for Public Enterprises, the Department for Environment and Tourism and the state-owned enterprises themselves, we addressed industry bottlenecks in the organisational structure of the enterprises and supported the adoption of effective government-wide methods for processing environmental impact assessments more effectively.
Our advisers were integrated into the organisations we worked with, which enabled effective capacity building from within, particularly at the Department for Public Enterprises. The SRPESA project has made real progress in helping South Africa address its infrastructure constraints and strengthen regulatory arrangements to improve access and competitiveness.
The DPE's capacity has improved greatly, enabling us to contribute more successfully to the realisation of the Government's developmental objectives. With the help from the SRPESA programme, we are now more effective in prioritising and getting implemented activities which will benefit the poorest in our society, in key sectors such as energy and transport.
Portia Molefe, Director General of the South African Department for Public Enterprises