The capitalisation model of Bolivia : assessing the applicability to the South African privatisation process

Jenkins, Karen (2001-12)

Thesis (MBA)--Stellenbosch University, 2001.

Thesis

ENGLISH ABSTRACT: The disposal of state assets is proceeding at a very slow pace in South Africa, mainly due to conflicting interests. On the one hand the business community supports privatisation and perceives the hesitance of government as a lack of commitment. On the other hand labour is opposed to privatisation, as to them it is synonymous with an increase in unemployment, will lead to price increases and the discontinuation of the extension of basic services to the poor. Government approaches each privatisation on a case-by-case basis and no definite decision on what should be done with the proceeds from privatisation has been reached. South Africa is currently in a position where it can learn from the models used in other developing countries. This study seeks to explore the unique method of privatisation used in Bolivia, namely capitalisation, and to determine which aspects can be applied in the South African context. Government did not receive the proceeds from the sale of the SOEs; it was reinvested in the enterprise to be used for development and expansion. Government relinquished control as the investor received 50% of the equity and full management control, while the remaining 50% of the equity was distributed to the general population through a private pension fund. In South Africa the state-owned enterprises are in dire need of recapitalisation to meet expansion targets and to remain competitive in the global environment. Even though the government is reluctant to relinquish control it is obvious that this will be inevitable to attract quality foreign investors. It is imperative that the necessary legal and regulatory structures be in place before embarking on the process. Effective regulation is especially important when exclusivity rights are granted to prevent public monopolies from being perpetuated as private monopolies. Involvement of the unions is important in the South African environment and has been formalised through the National Framework Agreement. South Africa is in a position to improve on the method used to distribute benefits to the general population in Bolivia. As in Bolivia, it would be senseless to let the population only benefit on retirement, considering the low life expectancy. The National Empowerment Fund was created to provide the previously disadvantaged access to shares of the privatised state-owned enterprises at a reduced price. The government should consider allocating 50% of the equity instead of the traditional 5 to 15%, to be held in individual portfolio accounts at no cost to individuals. Considering the importance of development in South Africa it is suggested that part of the revenue received from privatisation should be allocated to a fund, which can be used to expand services to the poorer communities and subsidise consumers who are unable to pay for these services. The Bolivian model is no panacea, but contains valuable lessons, which cannot be

AFRIKAANSE OPSOMMING: Die verkoop van staatsbates verloop teen 'n baie stadige tempo in Suid-Afrika, hoofsaaklik as gevolg van botsende belange. Aan die een kant ondersteun die sakegemeenskap privatisering en word die weifeling aan regeringskant beskou as 'n gebrek aan verbondenheid aan die proses. Aan die ander kant is die vakbonde gekant teen privatisering, aangesien dit vir hul 'n toename in werkloosheid simboliseer. Volgens hulle sal dit ook lei tot prysstygings en tot die onderbreking van die uitbreiding van basiese dienste na die behoeftiges. Die regering evalueer elke privatiseringsgeval op 'n individuele grondslag en geen definitiewe besluit is al geneem oor hoe die opbrengste uit privatisering aangewend gaan word nie. Suid-Afrika is tans in 'n posisie om te leer uit die modelle wat in ander ontwikkelende lande toegepas is. Hierdie studie ondersoek die unieke metode van privatisering wat in Bolivia gebruik is, naamlik kapitalisering en probeer vasstel watter aspekte in die Suid-Afrikaanse konteks van toepassing is. Die opbrengste van privatisering het nie na die staatskoffers gegaan nie, maar is herinvesteer in die betrokke staatsondernemings om gebruik te word vir ontwikkeling en uitbreiding. Die regering het beheer opgesê en die belegger het 50% van die aandele ontvang sowel as volle bestuursbeheer, en die oorblywende 50% is aan die algemene bevolking deur middel van 'n private pensioenfonds versprei. In Suid-Afrikaanse staatsondernemings is daar 'n dringende behoefte aan herkapitalisering om ontwikkelingsdoelwitte te bereik en om kompeterend in die globale omgewing te bly. Ten spyte daarvan dat die regering teësinnig is om beheer op te sê, is dit duidelik dat dit onvermydelik sal wees om kwaliteit buitelandse beleggers te lok. Dit is ook noodsaaklik dat die relevante regs- en reguleringstrukture in plek moet wees voordat die proses geïnisieer word. Effektiewe regulering is veral van belang as eksklusiwiteitsregte aan beleggers toegesê word om te verhoed dat staatsmonopolieë in private monopolieë omskep word. Betrokkenheid van die vakbonde is baie belangrik in die Suid-Afrikaanse konteks en is reeds deur die Nasionale Raamwerkooreenkoms geformaliseer. Suid-Afrika is in die posisie om te verbeter op die Boliviaanse metode om voordele na die algemene bevolking te versprei. Soos in Bolivia sal dit sinneloos wees om die bevolking eers by aftrede te laat baatvind as die lae lewensverwagting in ag geneem word. Die National Empowerment Fund is gestig om aan die agtergeblewenes toegang tot aandele in die geprivatiseerde staatsondernemings teen "n verlaagde prys te bied. Die regering kan gerus oorweeg om 50% van die aandele, in plaas van die tradisionele vyf tot 15%, in afsonderlike portefeuljes teen geen koste te plaas. Om die proses van ontwikkeling in Suid-Afrika te steun, word daar voorgestel dat "n gedeelte van die inkomste van privatisering aan "n fonds toegesê word wat gebruik kan word om basiese dienste uit te brei na minderbevoorregtes, en om subsidies te verskaf aan verbruikers wat nie in staat is om vir hierdie dienste te betaal nie. Die Boliviaanse model is geen wonderkuur nie, maar bevat waardevolle lesse wat Suid- Afrika kwalik kan bekostig om te ignoreer.

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