State-owned entities (SOEs) should be privatised, because the state cannot be trusted to own anything, says Deloitte MD of emerging markets and Africa Martyn Davies.

This comes ahead of the 2019 budget policy statement at a time in which stabilising SOEs, which have weighed on the country’s finances, will again be at the fore.

“Hopefully the trajectory is one from stagnation to currently thanks to [public enterprises minister] Pravin Gordhan moving towards stabilisation. The inevitable next step is privatisation. Those are the three steps,” Davies said at a media briefing.

“I don’t believe the state should own anything. In SA’s case, you clearly can’t trust the state to own anything,” he said.

Davies said President Cyril Ramaphosa will likely announce in the next few weeks that embattled power utility Eskom will be broken up.

“It should have been announced a year ago but we waited until we’re in this policy limbo as we wait for elections,” Davies said. “Breaking up Eskom is inevitable otherwise it’s going to tank the economy.”

Eskom is in a deep financial crisis, with R419bn debt which it is unable to service from its own revenue. The power utility is acknowledged as the single biggest risk to SA’s economy by the Treasury, credit ratings agencies and the investment community.

A task team set up by Ramaphosa will share its recommendations with the cabinet this week.

The restructuring of Eskom was put to the ANC lekgotla earlier in January. Gordhan said this week that a decision has to be made within a month.

“Structural stagnation is what we’re in. The backdrop of putting together this budget is incredibly challenging,” Davies said, adding that it will not be enough to stave off further credit rating downgrades.

Speaking at the same event, Deloitte Africa tax and legal MD Delia Ndlovu said finance minister Tito Mboweni will be under pressure to come up with a budget with popular appeal while increasing job creation and growth which will be exacerbated by rating agencies’scrutiny.

“Stabilising SOEs remains critical … Eskom will be front and centre,” she said.

menons@businesslive.co.za