China must become our loadstar to radically reform our society for the benefit of the poor
“Going global”. This is the theme of the Chinese state-owned enterprises (SOEs) as they embark on a programme to bring about the 2030 Agenda for Sustainable Development in the context of President Xi Jinping’s Belt and Road Initiative.
The Initiative, the Xi administration’s showcase, has identified sixty-five countries in which the Chinese want to make investments. The countries range from the far East, into central Asia, the Middle East, East Africa and also Europe but the number of countries involved in the initiative is growing. By literally going global, the Chinese wish to link their developments and investments in partner countries with ensuring that the goals of Agenda 2030 are achieved.
For Africans, who are sensitive to ideas and practices of colonialization, this must come as a relief. Unlike the colonialism we experienced, for the Asians had a different kind of colonialism than we did, Africans must be interested in benefitting from Chinese investment in our countries too.
The colonialism of yesteryear advantaged the colonial master only. Rather today the Chinese are much more interested in partnering with countries than just profiting alone. Hence the umbilical cord, created by Chinese state-owned enterprises, between their Belt and Road initiative, on the one hand, and the United Nations 2030 Agenda for Sustainable Development, on the other.
The link between the two programmes are important for the African continent and South Africa in particular for two strategic reasons. Firstly, it indicates the fundamental role played by state-owned enterprises in the pursuit of sustainable development. This development is not only aimed at reducing debilitating factors such as poverty, unemployment and inequality but must also ensure that our environment is safeguarded, young people have secure futures and that conditions can facilitate everyone exploring their capabilities.
The second reason, why this link between Xi’s initiative and the UN sustainable development goals is important, for those who collaborate with Chinese SOEs is to guarantee a partnership with local SOE’s. In other words, the Xi administration is aiming to export the ideas and role that SOEs have played in Chinese development through the Belt and Road Initiative. In doing so, it is important that partnering countries embolden their own role in bringing about sustainable development within their countries through SOEs.
It is within this context that the Second BRICS Forum on SOE Reform and Governance took place in Beijing recently. The forum follows the first held in India last year and the BRICS Summit held at the beginning of September in Xiamen, China. South Africa’s delegation composed of members of the Department of Public Enterprises and executives from our SOEs. A team from the Council of Scientific and Industrial Research was also present at the Forum.
All delegations present were honest in their reflections and not a single delegation did not indicate that they did not have challenges in their operations and management of SOEs. The forum had been initiated precisely so that SOEs could learn from each other and therefore become more meaningful in their contribution at home and abroad. As a result, the forum facilitated a space of exchanging of ideas and best practices but also allowed for the necessary networking for opportunities.
Chinese officials were explicit in the modern demands that needed to be made when engaging the role of SOEs. Firstly, pragmatic innovation had to be pursued so that economic development and cooperation could be assisted between domestic partners and international ones. Secondly, certifying correct corporate governance would create space for success. As South Africans, we know too well that unless corporate governance is good and clean there cannot be confidence shown in the enterprise.
Thirdly, SOEs themselves, together with the rest of the state, had to be proactive in securing a fair playground and thus ensure equity in the market. For conservative socialists, this might be a challenge but for socialism with Sino-characteristics this is imperative to ensure stability on the one hand, which the market cannot necessarily guarantee as we saw with the global crash in 2008, but also stimulate the economy through healthy competition on the other.
The Forum gave government and SOE executives the chance to explore various models in how each of these three pillars could be achieved. We know for example, that our policies during the latter years of the Mandela administration and in the first term of president Mbeki, encouraged partial privatisation of our SOEs. As a result, the enterprise enjoyed both a state stake as well as a private portfolio. Telkom, Airports Company South Africa, South African Airways and Iscor as well as the disposal of the state’s stake in MTN are examples of SOEs affected by these partial privatisations.
Realising the importance of role of SOEs in the developmental state, the second Mbeki administration then refocussed and abandoned the sale of stakes in SOEs. While non-core entities continued to be sold, the government ensured the reacquisition of stakes, in some instances especially those held by foreign entities.
This model, of partial privatisation, is mentioned because the Indians seem to be succeeding with it in some of its SOE sectors. The idea though is not a universal practice in India and therefore the necessary matches need to be made as to which SOE sectors can afford to dispose of stakes while which others cannot. It is an example of a model discussed at the BRICS forum.
South Africa’s Department of Public Enterprises currently handles a portfolio of assets totalling over a trillion Rands. The biggest being held by Eskom, Transnet and Denel. The financial year ending March 2016 saw a total turnover, in terms of revenue, of approximately 237 billion Rands. The Chinese State-owned Assets Supervision and Administration of the State Council (SASAC) manages SOEs whose assets value over 262 trillion Rands and in 2016 had an operating income of 100 trillion Rands. Comparatively speaking South Africa should be capable of managing much better a much smaller SOE sector than to that of the Chinese.
The lesson from the vast Chinese example should however be that the South African SOE sector should expand rather than seek easy silver bullets of privatisation. We should make the necessary hard decisions starting with the necessary centralisation of all SOEs under one roof, whether this is DPE or the Presidency. At the moment, unlike SASAC, too many political heads head the SOE sector in South Africa. We need one coordinating authority driving a developmental agenda for SOEs.
In response to the deep issues of governance, leadership operations and financial sustainability, President Zuma appointed a committee to review state owned enterprises. The recommendations of that Committee must be evaluated and the necessary implementation be done immediately.
The chattering classes in South Africa may moan about state capture, China colonising our continent and state-owned enterprises be a waste to the state but if we do not interrogate each of these and examine them correctly, we will remain with the challenges we have. Fora such as these organised under the auspices of BRICS give us the opportunity to go global in finding solutions to our challenges. For the sake of future generations, we dare not squander this opportunity to build with BRICS.
Wesley Seale lectures politics at Rhodes University. Seale is currently in China completing his PhD and attended the Conference as part of the Department of Public Enterprises (DPE) delegation.