Public companies vs South African private companies – the winner is clear

The new finance minister, Tito Mboweni, has been tasked with restoring a very bad economy.

South Africa has suffered recessions and unemployment rates continue to climb as there seems to be no respite for the average South African.

Mboweni and President Cyril Ramaphosa have the unenviable task of trying to remedy the situation. A major hurdle to overcome: state-owned enterprises that drain money.

Life-saving plans for state-owned companies

One of Mboweni's main topics of discussion after his appointment was his Bailout of 5 billion rand for ASA, as well as a bailout of R2.9 billion for the post office SA.

This decision frustrated many South Africans because of the reputation of these organizations for having incurred heavy repeated losses.

Mr Mboweni pointed out that many state-owned companies needed to be reconfigured, stressing the SAA as a state enterprise in need of "drastic measures".

Ramaphosa also criticized state-owned companies, calling them corruption sewers.

Deon Fredericks, Acting CFO of SAA, recently said that outsourced companies cut their terms of settlement from 21 days to 7.

It is apparently an attempt by these providers to recover their money before any possible financial collapse of the SAA.

The SAA also barely pay the lenders 5 billion rand, which are due before the end of November.

Even if this payment is made, SAA will have to find an additional 9.2 billion short – term loans by the end of March 2019.

SAA is facing a 3.5 billion rand shortfall over the same period, which adds to its long list of problems.

"The problem with the transformation of the SAA is that the board needs to focus permanently on funding issues rather than on the operational side," Fredericks said.

Privatization of public services

The head of the Democratic Alliance, Mmusi Maimane, has already called for privatization inefficient public enterprises, claiming that their privatization will introduce competition in key industries.

This feeling has been taken up by economists like Azar Jammine, who said the lack of SAA profit since 2011 was a reason for privatizing it.

However, some private companies are already operating in competition with state-owned companies.

Here's how they compare to their government-run counterparts.

Airlines companies

SAA is the dominant airline in South Africa, leaving little room for competition due to government support.

Comair competes through its Kulula.com brand, as well as domestic flights operated by British Airways.

SAA incurred a net loss of R5.7 billion in the prior year. The national airline also owes its entities 16.4 billion rand, of which 5 billion have been paid with your taxes by the government.

As a comparison, Comair celebrated the rise in its net profits from one year to the next, its profit for 2017/18 exceeding the 325 million rand.

Telecommunication

Broadband Infraco is an SEO in the telecommunications sector that provides a long distance network infrastructure.

The latest report available on the national government website is 2016-2017. In this period, Broadband Infraco suffered a loss of 125 million rand.

In contrast, private telecom giants in South Africa have performed much better.

The two largest mobile networks in South Africa – Vodacom and MTN – have seen considerable benefits.

Diffusion

SABC is the South African state broadcaster. In addition to its free television channels, it also operates in areas such as broadcasting.

For the 2017/18 fiscal year, the SABC suffered a loss of 622 million rand, due to the cuts made by advertisers, the drop in audience and difficult economic conditions.

MultiChoice is a leading South African private broadcaster and its flagship products are the popular DStv and Showmax pay video services.

Now read: See how much money Eskom and SAA lose every second