Committee on Planning, Monitoring and Evaluation Expresses Alarm Over Centralisation Risks of National State Enterprises Bill

The Portfolio Committee on Planning, Monitoring and Evaluation has expressed significant concerns regarding the centralisation of state-owned entities (SOEs) as outlined in the National State Enterprises Bill (B1-2024).

During a meeting on Wednesday, the committee received a briefing from the National Treasury (NT) and the Financial Fiscal Commission (FFC) on the Bill, which aims to develop a strategic approach to enhancing the governance and operational efficiency of SOEs. National Treasury highlighted critical issues, particularly the proposed non-application of the Public Finance Management Act (PFMA) to the holding company and its subsidiaries, which could undermine transparency and accountability in financial management. NT cautioned that the centralisation model poses risks, such as increased political interference and the potential for state capture, emphasising the importance of ensuring that SOEs remain financially sustainable without undue reliance on public funds.

In its presentation, the FFC stated that it does not support the Bill in its current form, noting that it fails to address longstanding governance concerns experienced over the past 30 years. The FFC recommended that the holding company be established within the National Treasury’s budget baseline, in accordance with Sections 213 and 216 of the Constitution.

During the questioning phase, committee members raised significant concerns about the centralisation issues presented in the Bill. They argued that a centralised model could lead to a lack of transparency and accountability, making it more vulnerable to corruption and political interference. Members highlighted that consolidating oversight of SOEs under a single holding company might exacerbate existing vulnerabilities rather than mitigate them, potentially creating an environment where decision-making becomes opaque and less subject to scrutiny. Additionally, there were worries that centralisation could undermine the transformative goals for SOEs, distancing them from the necessary checks and balances that ensure equitable governance and public accountability.

The committee members expressed a strong sentiment that the Bill, as it stands, does not adequately protect the interests of the public or ensure the effective functioning of SOEs. Members highlighted the importance of maintaining robust oversight mechanisms to prevent the erosion of accountability, particularly given the historical context of governance challenges within SOEs. Members voiced their commitment to ensuring that any legislative framework promotes transparency and fosters public trust, arguing that the proposed centralisation could lead to a concentration of power that is detrimental to democratic principles.

While National Treasury did not explicitly call for the Bill to be withdrawn in its current form, it acknowledged the necessity for reworking the legislation. The committee flagged the risk that the holding company could be controlled by multinational corporations, raising concerns that Parliament might enact a law that leaves the state powerless in managing public funds effectively. Members articulated a shared apprehension that the proposed changes could inadvertently enable the very issues the Bill seeks to address, further complicating the governance landscape for SOEs.

The committee also raised alarms about the fiscal risks associated with establishing the holding company, particularly the significant funding requirement of R615 million. Members expressed scepticism regarding the feasibility of the innovative funding mechanisms proposed. Furthermore, committee members indicated that the Department of Planning, Monitoring, and Evaluation (DPME) appears to be circumventing the public procurement process, suggesting that the DPME’s approach could remove SOEs from the public procurement environment altogether.

In response to the FFC’s presentation, the committee welcomed their directness, contrasting it with the more diplomatic approach taken by National Treasury. Following a robust engagement among committee members regarding the next steps for the Bill, there was a prevailing view to pause its progress in light of the presentations received. The committee resolved to seek further guidance and legal advice, as there was overwhelming sentiment among members to halt the process, despite the Bill already being before the committee.

Distributed by APO Group on behalf of Republic of South Africa: The Parliament.