Page 122 - Risk Report 2024

1. Functional State 2. Politics

Public sector entities are directly owned by Government, Changes in national policy, whether arising from coalition
with a result that State dysfunctionality affects them through politics or not, has the possibility of moving public sector
shareholding decisions that may reflect such dysfunctionality. goalposts. If this change has little alignment to the previous
Changes in Government send ripples through the sector where policy, it can easily result in a loss of strategic direction and
alignment to national strategy and priorities informs entities’ in some cases even undoing good work or progress. State-
objectives. Most of the sector, even with guidance from the State, owned companies should start to be weaned off national
demonstrates limited resilience to navigate uncharted waters policy as far as it is practically possible. By incorporating best
and appear to be rife with governance failures. It is imperative practice business principles, implemented by a competent and
that adequate skills and experience are embedded to enable experienced workforce, the direction of these entities should
the sector to be run on similar principles to the private sector. remain on course with less exposure to political volatility. The
Governance failures and poor service delivery directly affect the complexity of coalition politics, especially in an election year
State's ability to function effectively, impacting everything from can lead to unstable governance structures. This instability can
healthcare and education to security. The failure of Government hinder both domestic and international confidence, affecting
or coalition governments to effectively collaborate or prioritise foreign investment and international relations.
national interests can lead to a dysfunctional State. This in turn
can worsen critical issues like unemployment, and the water
and electricity crises.

3. Economy 4. Social Security
Economic decline could severely damage the market for The high unemployment rate dovetails into inequality and
State-owned entities’ products and services, affecting their adversely impacts quality of life for unemployed and employed
ability to continue operating as going concerns. Mitigating this alike. This often manifests as social unrest which exacerbates
risk include adequate diversification into export markets to conditions in an already fragile society. The resultant increased
hedge against downturns in the SA economy and currency. In risk of vandalism could be fatal for some State-owned entities
the public sector, the focus is traditionally more on domestic with limited capital available to rebuild. The intentional
activity and creating value nationally, than to use SA as a development of small businesses must be accelerated and
springboard into Africa. Expansion into SADC is the easiest, but barriers to entry removed to stimulate growth, thereby
a global reach could be more beneficial to weather economic fostering ownership in the local economy through incubation
storms in the interest of citizens. Despite current challenges, and entrepreneurship. High unemployment and inequality
SA has the biggest economy in Africa characterised by having can directly threaten social stability and quality of life. High
the continent's highest GDP. Governance failures and poor unemployment, especially among the youth, fosters social
service delivery impacts are detrimental as they create an unrest and crime. From a public sector perspective, addressing
unstable business environment, discourage foreign investment these issues involves investing in education and training to
and reduce economic growth. Service delivery failures, such as equip citizens with the skills needed in a developing economy
those seen in the ongoing struggles with electricity and water and improving labour market policies to ensure they support
infrastructure directly impact economic productivity and reduce economic development.
the quality of life eroding the economic stability essential for
economic development.

5. Rule of Law 6. Water
In some entities corruption is pervasive to the culture. These Despite having been flagged many years ago as the next
illicit activities could drain the sector of its already-depleted infrastructure collapse after electricity and rail, SA is
resources to a point where collapse is probable without further approaching such collapse. No access to water would fuel
bailouts. This undermines investor confidence to the extent that unrest and instability at the expense of business and society.
foreign direct investments may all but disappear. Zero tolerance Water infrastructure maintenance and improvement should be
should be unwavering, and justice should be swift and severe. prioritised, and appropriate deregulation explored. Addressing
Internally, entities should improve awareness of the impact of the water crisis from a public sector perspective is urgent as it
crime and the avenues available to whistleblowers. Persistent often has a more severe impact than the electricity crisis. Water
crime affects all levels of government, business and society supply and infrastructure challenges threaten food security,
reducing SA’s ability to address other risks like economic economic activity and sanitation. Given the increasing frequency
instability and service delivery. of droughts and floods due to climate change, the public sector
must enhance its emergency response strategies. This includes
improving early warning systems, creating additional water
reserves and planning for emergency water distribution to
ensure that the most vulnerable have access to water during
crises. The public sector needs to develop and enforce policies
that reduce water wastage. Additionally, introducing incentives
for water-saving technologies and practices can improve water
efficiency across sectors.