Term:PARASTATAL

Parastatals or State Owed Enterprises (SOE) are corporations owned and controlled by the government. In South Africa there are about 200 SOE’s which deal with everything from power (Eskom) to forestry (Safcol), defence (Denel) and transport (Transnet). Unfortunately, some of them (like SAA) are persistently unprofitable and constantly have to be subsidised by the government (and hence the tax-payer). Many of them are also badly run or involved in corruption and nepotism to a greater or lesser extent. The most dangerous of them is Eskom which has over R215bn in government guaranteed loans. It has also been shown to have been subject to state capture and corruption on a significant scale. If Eskom’s creditors decide to call in their loans, the Treasury would be hard put to meet their obligations – which also accounts to some extent for the ratings downgrades which South Africa incurred in 2017. In general, the less functions in a country which are run by the government the better. Governments are notoriously bad at running things and their activities should be kept to a minimum. As Adam Smith said “The best government is the least government”. South Africa could easily sell off many of its SOEs and thereby generate a substantial amount of cash to repay government debt. This would result in an improvement in our international credit rating and an improvement in the economy.

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