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Keeping SOEs alive through state funding is robbing the poor

Billions could be reallocated to programmes aimed at ending poverty.

It has been decades since the global campaign “Make Poverty History”, spearheaded by some of the biggest names in Hollywood and the music industry, took the world by storm. Sadly, most of the world’s population still lives below poverty lines and will continue to for years to come. Here at home, the ‘war on poverty’ has not ended.

Yet, according to research from the Centre for Global Development (CFGD), ending poverty for emerging economies is possible. The research findings show that, “lower poverty lines ending global poverty may now be within the financial capacities of most national governments of developing countries either in the form of potential new taxation or reallocation of existing public finances though this is not the case at higher poverty lines”.

This had me thinking about the billions of rand that has been spent and will be spent on struggling state-owned entities (SOEs), namely Eskom and SAA. In February, the former had to take a R5 billion bridging loan on top of the R300 billion debt it already has. Now, imagine if those two companies did not require public finances to bail them out and sustain them. Of course, the only way such a scenario could be possible would be if SAA was sold and Eskom partially privatised. In turn, those billions would then be reallocated to programmes aimed at ending poverty.

So yes, there’s merit and even quantifiable evidence to the CFGD research, South Africa and maybe some developing economies already have the financial capacities to end poverty and even lift the middle up slightly.

The monies spent on just two SOEs in the last ten years alone could have had a significant impact on the 30 million South Africans (mostly children) who are living in poverty.

In chastising and calling out business for ‘slave wages’, organised labour must equally call out government for being the force that made and sustained poverty.

I believe one of the hardest things trade union Cosatu must do soon, if it is to remain relevant, is confront itself before confronting its alliance partner – the ANC. Does the union want government to continue financing the leaking and economy-threatening SOEs or does it want a government that addresses inequality and smartly redirects resources?

South Africa is a country that finds itself in the belly of an unfolding process called globalisation while trying to improve the lives of most of its people. While currents of the global growth of the last 30 years filtered to most parts of the world including here at home, they are yet to reach those who live below food poverty lines meaning more must be done by their governments to help them, to jumpstart them, lift them out of poverty and plug them into the economy as the wheel of globalisation continues to spin forward.

At the start of this article you may have received the impression that I’m against global campaigns aimed at ending poverty. I am not, when it comes to poverty, every effort matters. In our continent’s context, and more so at home, we cannot always look to aid organisations for help, they’re not the panacea of solving problems.

In the medium and long term, South Africa must develop its strategy on tackling what former statistician-general Pali Lehohla aptly named “the feminisation of poverty” since after children, women are more affected by poverty than men.

Government must start now, unless it wants to carry the mark that creates and sustains poverty by misusing and failing to redirect public finances from areas (SOEs and unnecessary government departments) where they are wasted into areas where they can make a difference – the people.

*Centre For Global Development – Gasoline, Guns, and Giveaways: Is There New Capacity for Redistribution to End Three Quarters of Global Poverty? – Working Paper 433

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If all S.A. worker unions and political parties think a bit more longer term, a bit more rationally and a bit more economically sensibly – in the interest of the mass poor population in S.A. – they will certainly opt for economical expansion instead of protectionist policies.

They will then convince government to sell at least 50% of its stake-holding in most SOE’s (Prasa and state owned hospitals included).

The benefits of such move will be:
a) the new private partners will quickly sort out the mess and leakages at these state owned enterprises, will ensure efficient operations, well managed finances and continued job opportunities;
b) Government will still remain an important partner in these enterprises;
c) Government will not only gain the purchase price for selling a 50% stake to the private sector but will literally save billions of Rands each year by not having to subsidize these SOE’s annually;
c) Government can then use a portion of these monies to lower the debt of government, thereby improving the rating agencies’ risk rating of S.A. which again will attract more international investments, culminating in new jobs and less unemployment;
d) Worker unions must however also demand that a substantial portion of the sale price and annual savings are directly allocated towards wide ranging poverty relieve such as (i) housing for the poor, (ii) basic services, (iii) training facilities where the poor can obtain important job orientated, skills development and (iv) also allocation to investments that will create decentralized new jobs such as inmanufacturing, infra structure development, cooperative farming, etc.

Rather opt to expand the economy to an inclusive stronger economy than protecting the run-down, poorly managed, bankrupt state owned enterprises in order to save a few jobs but thereby bankrupting the government, and missing out on creating a lot more new job opportunities and wider spread poverty relieve.

What we stand and fight for today, will surely effect the well-being of our children tomorrow.

Privatisation must be properly done and just another looting scheme.

The Unions do not care about the poor, they just say they do.
I believe that any person with a full time job, under the union system cannot be classified as poor – they might not be rich – but very few people are capable enough (or lucky as some of the ANC cadres can attest) to become rich in one generation. For most of us, even moderate richness take a life time to accumulate.
So most unions will never be satisfied, they want it all and they want it now.
More jobs for more people is not their concern.

Well done Mamokgethi,
This government – at EVERY level from local municipalities all the way to the top – has been stealing billions from the poor since 1994, deliberately sustaining poverty and inequality, the things they claim to be fighting and for which they blame everyone but themselves.

The speed of posive change under the new government leaders is amazing. The solutions are been sought and implemented.

This is an excellent article which should be stuck under the noses of the government and trade unions, but it is not likely to happen nor will they buy into any definitive measures to fight against poverty without first looking after their own interests and increasing taxes. Since taking power the ANC has been involved in corruption in the arms deal and allowing Zuma and the Gupta’s to continue the plunder with billions lost and Cosatu and the other unions have continued to support a corrupt government. They too look after themselves before thinking about the masses living in shacks and struggling to feed and clothe themselves and their children, never mind their plight to give their children a good education.

Maybe we should call for a start to a,above all, a PEACEFUL “POVERTY MUST FALL” campaign.

Like bigoteering, capitalists using the poor here to sell the idea that “efficient” business needs to replace public service delivery and infrastructure delivery.

One can make an argument for 50% shareholding, however then lets use the best model fopr Africa the Botswana model and nationalize 50% of national resources also.

We are a democracy, so the people have got the government they deserve. The problem for the minority is that they also get the government that the majority deserves.

The voters entered into a contractual obligation with their leaders that indemnifies the leaders of any accountability. According to this unwritten but implicit contract voters gave the ANC leaders free a Call option on corruption. If the leaders get away with corruption the money is theirs, if they get caught they may shift the blame down to the voters. – “In the ANC the responsibility lies with the collective, we share the responsibility and the accountability”. This is the financial benefit if you are an ANC leader, unsophisticated people sell you the most sophisticated financial instrument there is, at zero cost.

The ANC voters wrote a Call option on corruption and gave this right to their leaders. Now as reality kicks in they want to expropriate assets without compensation to settle the margin calls.

Great article this message needs to be repeated again and again.
If Pravin can get the SOE’s to break even let alone make a profit we will be better off. Only the relatively rich can afford to fly, flying is not a mode of transport of the poor so why not privatize SAA. Bailing out SAA is a waste of tax payers money.

Govt. needs to govern and leave business to businesspeople. scrap BE andAA stop threatening those with money and land with redistribution. i have recently transferred more money overseas and as i am writing in the north of JHB there is an attempted landgrab by red beret idiots. the police are present and bullets are flying. i have already sent pics and a report to relatives and friends overseas, they need to know the truth not what Cyril and his MFS are trying to BS investors.
fix the mess of this kleptocracy and poverty will disappear , do’nt and the good people and their money will continue to exit

Well said!

And to add my 2cents: There is just so many farms on the market right now. If they can scrape together R5B to through at sinking SOEs they can certainly do that to buy farms very easily for redistribution. But no, they don’t want to solve political issues as they need a common enemy to rally votes.

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