The fiscal-risk statement strengthens the case for selective restructuring of state-owned enterprises. Organ-of-stateness offers a constitutional framework for doing so without abandoning public purpose.

Introduction: reform the institution, preserve the obligation

Judge a developmental state by what it makes possible, not simply by what it owns. Electricity that supports production, railways that move goods and infrastructure that connects excluded communities are instruments of development. Preserving a corporate structure that cannot reliably deliver these outcomes is not necessarily the same as defending the public interest.

This distinction matters in the contest between advocates of an interventionist state and those who favour a larger private-sector role. Resistance to privatisation raises legitimate concerns about monopoly power, affordability and the loss of strategic control. But treating every separation of functions as a sale of the national inheritance closes off choices that could preserve public ownership while improving performance. Equally, presenting private participation as an automatic cure evades questions about who carries the risk and who receives the returns.

The constitutional question is therefore not simply whether the state should own more or less. It is whether a proposed institutional arrangement lawfully and effectively secures the public obligations at stake. This opinion argues for selective restructuring, disciplined by constitutional duties, transparent financing and enforceable accountability. Neither an ownership certificate nor a private contract is a substitute for that test.

What the fiscal risks justify—and what they do not

The fiscal-risk statement in the 2026 Medium Term Budget Policy Statement provides a reason to move beyond this binary. It does not prove that privatisation is necessary, or that every enterprise should be unbundled. It does show why institutional arrangements that repeatedly expose the national budget to financial distress deserve reconsideration. Fiscal sustainability is not an alternative to developmental ambition: it helps sustain the resources that make that ambition practical.

The figures require careful reading. The supplied statement records a decline in the government guarantee portfolio from R982.4 billion in March 2026 to R960.6 billion in June. It also records a R46.1 billion reduction in utilised guarantees by state-owned companies, largely reflecting lower Eskom exposure. Yet it expressly cautions that a reduction in utilised guarantees does not reduce overall fiscal exposure by an equivalent amount: some of the apparent improvement reflects support already paid. A guarantee discharged through a budget transfer has not simply disappeared; part of the contingent risk has become a public expense.

Nor should the evidence be exaggerated. Treasury assesses contingent-liability risk as medium and broadly unchanged since the 2026 Budget, with principal residual risks concentrated in Transnet and Eskom. It acknowledges operational improvements and the benefits of support. The defensible argument is therefore not that public ownership has universally failed. Instead, improvements must become durable enough to reduce recurring dependence on the fiscus.

Transnet illustrates the problem. The statement describes improved revenue and earnings alongside ageing infrastructure, maintenance backlogs, high debt and rising debt-service costs. Operational recovery alone may not generate the balance-sheet strength needed for investment. Separating infrastructure management from competing operating services could, where properly designed, clarify costs, expose bottlenecks and create fairer access to a publicly controlled network. This is a policy inference from the diagnosed risks, not a result the fiscal statement has already demonstrated.

Unbundling must consequently be distinguished from privatisation. Functional separation assigns activities to distinct units; legal separation establishes distinct entities; ownership transfer changes who owns them. The first two need not entail the third. A state can retain strategic network assets while allowing different operators to provide services under enforceable access and performance rules. Whether that arrangement is preferable depends on the sector, the financing model and the capacity to regulate it.

The constitutional test: public power beyond ownership

Organ-of-stateness is useful here as an analytical lens, not an independent source of legal authority. Section 239 of the Constitution includes departments and administrations, as well as other qualifying functionaries or institutions exercising power under the Constitution or a provincial constitution, or exercising public power or performing a public function under legislation; it excludes courts and judicial officers. The inquiry therefore concerns the legal source and character of the power, not ownership alone. Section 195 adds a substantive standard: public administration must use resources efficiently, be development-oriented, accountable and transparent, and its principles expressly apply to public enterprises. Corporate separation does not, by itself, displace these requirements.

Three constitutional questions must nevertheless remain distinct: whether an institution is an organ of state, which rights and duties govern its conduct, and whether a particular decision constitutes administrative action. Section 8 binds the state to the Bill of Rights and can bind private persons where the nature of the right and duty makes that appropriate. Section 33 protects lawful, reasonable and procedurally fair administrative action; its application depends on the decision and the governing law, not merely the identity of the shareholder. Section 7(2), meanwhile, requires the state to respect, protect, promote and fulfil the rights in the Bill of Rights. Contracting out delivery cannot contract away that responsibility. Nor does performing an ordinary commercial contract automatically make a supplier an organ of state.

Reform design must also satisfy legality: public actors need lawful authority for the powers they exercise, and their choices must be rationally related to a legitimate purpose. Where section 217 applies, procurement must be fair, equitable, transparent, competitive and cost-effective. Section 215 requires budgets and budgetary processes to promote transparency, accountability and effective financial management. These provisions do not prescribe a single ownership model. They do prevent government from treating restructuring as a constitutional blank cheque or fiscal opacity as a financing strategy. The case for an integrated or unbundled enterprise must be made on evidence within these constraints.

The practical middle ground is therefore neither an unchanged monopoly nor an indiscriminate sale. It requires differentiated institutional design: public control where strategic coordination matters, contestability where competition can work, and explicit funding for obligations commercial revenue cannot sustain. Specify, cost, and monitor affordable access, network maintenance, service to less profitable communities, and industrial-development objectives rather than burying them in an opaque corporate balance sheet.

Eskom and NSFAS: restructuring cannot erase funding duties

Eskom supplies an important warning against structural optimism. The fiscal statement links easing risks to operational improvements and debt relief, while identifying municipal arrears as an ongoing liquidity threat. Creating separate companies cannot make unpaid electricity bills disappear. Nor can it extinguish legacy debt. Treasury itself notes that the fiscal consequences of electricity reform depend on final financing and risk-allocation arrangements. Moving liabilities between public entities is not the same as reducing them.

The National Student Financial Aid Scheme illustrates the broader funding principle, not a case for enterprise unbundling. Its spending requirements exceed the resources available within the higher education baseline, creating liquidity pressures. Government will pool available surpluses within the skills development system to mitigate immediate funding risks while implementing measures to align the scheme’s expenditure and funding arrangements with available resources over the medium term. Until these adjustments take effect, the scheme remains a material expenditure risk, although the extent of the potential fiscal exposure is uncertain. For enterprise reform, rearranging institutions or pooling funds does not, by itself, resolve a mismatch between public commitments and available resources. Public obligations must be explicitly funded, not merely shifted elsewhere in the public system.

NSFAS also brings the organ-of-stateness argument beyond enterprise reform. Established under the National Student Financial Aid Scheme Act 56 of 1999, it is a statutory instrument for advancing access to further education. Section 29(1)(b) requires the state, through reasonable measures, to make further education progressively available and accessible. Unlike section 29(1)(a), which protects basic education, this provision expressly contemplates progressive realisation through reasonable measures; it does not establish an automatic entitlement to every claimed funding amount. But neither does a funding shortfall settle the constitutional inquiry. Assess changes to eligibility, disbursement, or institutional design against that continuing obligation and the administrative safeguards that apply to individual decisions. The obligation is broader than the scheme: changing the delivery institution cannot absolve the state of responsibility for access.

Private delivery, enforceable public accountability

This opens a qualified path towards what might be called private-sector organ-of-statisation: attaching public-law accountability to private institutions insofar as they lawfully exercise qualifying public powers or functions. This is an analytical proposition, not a new statutory category. Under section 239, the inquiry turns on the function, its legal source, and the powers exercised, not ownership alone. A private donor or an ordinary banking contractor does not automatically become an organ of state. A private institution entrusted under legislation with a public student-aid function may occupy a different position, depending on the governing law and arrangements.

The Constitutional Court’s decision in AllPay Consolidated Investment Holdings v Chief Executive Officer of SASSA (No 2) [2014] ZACC 12 supplies a concrete illustration. In the social-grant payment arrangement before it, the Court treated Cash Paymaster Services as an organ of state performing a public function. It recognised constitutional obligations that extended beyond the contract. It declared the contract invalid but suspended that declaration to protect continuity while a fresh tender process proceeded. The lesson is not that every contractor has identical status or duties. An unlawful procurement arrangement cannot be insulated from constitutional scrutiny by private incorporation, and correcting illegality must also protect the people dependent on the service.

For student aid, the policy option is therefore to test properly authorised partnerships for specified administrative functions while retaining public responsibility for eligibility policy, funding commitments and oversight. Fair decisions, accessible remedies, data protection, transparent fees and continuity would need enforceable safeguards. Organ-of-stateness neither authorises an unlawful delegation nor finances a funding shortfall; it disciplines how a lawful arrangement operates. As with electricity and rail, the test is whether differentiated delivery secures the public purpose without dispersing accountability or concealing fiscal risk.

A public-interest test for institutional reform

Any unbundling proposal should therefore pass a demanding public-interest test. It should identify the operational failure that separation will remedy and compare restructuring with credible alternatives. It should disclose legacy debt, transition costs, guarantees and possible termination liabilities across the whole public sector. It should specify who finances maintenance and expansion, who carries demand risk, and how affordability and universal-service commitments will be protected. Workers and affected communities should have meaningful opportunities to shape the transition.

Above all, reform must not replace a public monopoly with an inadequately regulated private one. Private finance is not free finance, and contractual guarantees can shift commercial losses onto taxpayers. A smaller enterprise balance sheet is no achievement if the government takes on larger hidden obligations elsewhere. Published performance benchmarks, transparent procurement, credible regulation and enforceable remedies should precede claims of fiscal success.

Conclusion: the obligation survives the enterprise

The fiscal-risk statement supports selective unbundling as a policy option to test, not a universal prescription to impose. The constitutional case is equally conditional: reform must have lawful authority, protect the rights at stake, disclose its financial consequences and leave identifiable institutions answerable for delivery. Organ-of-stateness explains why public accountability can follow a qualifying function beyond a state-owned company’s boundaries; it does not confer powers, supply missing funds, or excuse weak regulation. Eskom and NSFAS expose the same error in different settings: relocating an obligation is neither financing nor fulfilling it. The developmental state need not deliver every service through one corporate bundle, but it must retain the capacity to secure its public purposes. Unbundle the enterprise where the evidence warrants it—not the public obligation.