In two previous articles privatization was dealt with as an economic remedy and there are enough global cases of privatization to tell the Why and How!

Another article discussed corporatization and commercialization as means to prepare the state owned enterprise for eventual transfer of ownership and control over the entity (true privatization versus merely listing).

Investor communication plays a pivotal role in taking privatization from start (corporatization and commercialization) to finsih (new ownership shared with government the minority shareholder, or full blown private ownership)! Therefore the design of the privatization investor communication strategy needs to be rational, with integrity and structured.

Structured in what way? Structured means you cannot start the race at the finishing line back to the blocks. So, where does privatization investor communication start? All starts with one word, Intent! Uttered and documented by the state, cabinet and parliament.

This intent and concomitant privatization plan would form the key message for the communication of privatization to investors. And, shape the integrated investor communication strategy behind it!

Misleading intent and opaque privatizing plans could render any effective investor communication strategy stillborn!

Why will effective investor communication strategy be rendered stillborn?

Mutize, from the UCT Graduate School of Business in South Africa hits the nail on the head by arguing that Public entities could be listed on any stock exchange without being privatized. Then there is no message other than 'we plan to list on the stock exchange and that would be 'privatization'.

How would the state owner be able to do this? It could be done through the realignment of ownership structure allowing the private sector to invest in these entities through buying shares on the stock exchange. Entities would therefore secure funding through public trades on a stock exchange.

Considering what has been argued in pre-ceding articles (see further reading), this would defeat the purpose of true privatization. In the end, by listing only, it would mean that the government retains control of the company in all its aspects strategically and operationally, while the capital raised by listing could end up in a bottomless pit.

Privatization, seeing the government transfer ownership and control of the business to a privately owned entity, would have the benefit of saving government from having to use taxpayer money to provide bailouts, or use state pension fund savings under the guise of strategic investment.

If governments are going to invest then it should be strategically placed from capital raised through taxation money allocated to its tiers of government expecting an economic and social return to enable private sector to operate on macro levels (private owners carries the burden of running the company successfully). Government investment guarantees could be used to support infrastructure, investment and capital expansion oppose to finance losses and inefficiencies in the state-owned enterprises.

Once government has made its intention to truly privatize clear, as oppose to announcing it intends to merely list state owned enterprises, the path is set to prepare an integrated investor communication strategy to run parallel with all privatization thrusts.

Clear documented and well publicised intent could, inter alia, help to do the following: through effective privatization investor communication strategy develop understanding, trust and confidence in the investment proposition; and, prevent or eliminate possible surprises.

The first phase of 'Getting ready' had two steps (to recapture from previous articles. (see further reading).

Step one was the identification and selection, where the government chooses its candidates for privatization. Preparation of the privatization candidate by means of corporatization and commercialisation needs to be mentioned. As a given investors would not invest in an unattractive proposition even if the state owned enterprise is sold at a discount of its estimated value using government methodology.

Step two was the feasibility study, where the government identified policy issues and develops options for resolving them, and corporate financial advisors finally value the enterprise (using methodology investors would believe in) and provide options on timing and method of sale.

These two steps would already have created an abundance of pre and during-privatization investor communication content!

Content which would have to have reached not only those employed in the state owned enterprise but all stakeholders outside the entity itself.

Those working within the state owned enterprise needs to be singled out for a moment, because of their crucial importance as a very specific audience and stakeholder in the future privatized company.

As a crucial part of eventual privatization the enterprise would have to have created effective organizational communication during corporatization and commercialization, to prepare the employees, executives and board for the day ownership transfer into new hands. If not, then the new owners of the state owned enterprise would inherit an organization where those that has to produce towards a new bottom line with new rules, would find themselves uninformed, unprepared and would not be able to cope with the challenges privatization brings about! It would lead to resistance and low productivity.

While a theme for another discussion, organizational communication is not merely an employee communication thrust with the normal company newspaper, memorandums, billboards and what have you.

Organizational communication during corporatization, commercialization and eventual privatization is a board and top management policy based on audits measuring communication (what do you know about the direction the enterprise is taking, how do you feel about it, how much do you participate); measured at all levels of the organization and correlated. Communication policy should then be the standard set for all organizational strategies, plans and be monitored on-going.

Where are we now with the overall process having spent time on 'Getting ready' for privatizing the state owned enterprise?

The privatizing enterprise now finds itself in the second phase. There is a movement toward selling the state owned enterprise in three steps. These are:

Privatization planning where the government resolves policy issues and, with its financial advisors, plans the sale.

Legislative or approval phase.

Implementation or transaction, where the government and its advisors make the sale through a bidding, or public offering (privatization methods globally have now become varied and very sophisticated much tailored to very specific country, political, economic and social circumstances, and needs).
Once the government resolved policy issues, the sales plan is designed and the sale got approved privatization investor communication switches over to top gear. The strategic objective would be to get the offering to the investment world and related stakeholders.

The strategic objective could be divided into goals focusing on key aims such as:

To explain why the privatization offer is an attractive one.

To explain why the privatization offer is feasible.

To explain why the privatization offer would render returns.

To explain why the privatization offer would be a sustainable investment; and others!
There would be a very large amount of corporatization and commercialization content to analyse before embarking on the design of an integrated privatization investor communication strategy. Bear in mind at this stage one is not now focusing on the tactical technical and creative sides of effective privatization communication. This would follow later to enable one to present the best investment case with the best tools available.

In analysing corporatization and commercialization content strategic thinking should be guided by some of the following fundamentals.

1. Your envisioned investors. Considering the size and value of the average state owned enterprise investors would probably be institutional; foreign or a combination of foreign and domestic. Very important for the state owned enterprise owner is to understand the investor who would be interested in buying the state owned enterprise. Investors across the board generally speaking would like to see the following coming through when they are communicated to:

Evidence that investment could be linked to corporate and business strategy in a broader workable political, economic, social, legal and technological environment

Demonstration of insight and long range thinking proving that the investment will stand the test of time.

Protection of the investment considering all risk factors.

Environment conducive to the growth of the investment.
2. Profit generation capabilities investors would be interest in.

3. Market intelligence (current and potential future market) they would be interest in.

4. Scalability scenarios based on the current and future market, as well as the evolution of current and future products and services.

5. Existing human capital and by extension who is running the enterprise currently.

6. Risk (current and future) and management thereof.

7. Funding Requirement.

8. Financials from the past, present and projected future illustrating the fiscal responsibility, successes and failures of the entity.

9. Exit strategy from the day the state owned enterprise hands over to new owners.

The intent to privatize should then be converted into core themes and factual, yet creative messages, which can include inter alia:

Analysts understanding of the privatization intent.

Progress made with commercialization.

Progress made with corporatization.

Corporate governance.

Corporate culture.

Competitive position.

Currency risks.

Earnings history.

Employee efficiency.

Financial control.

General comment and analyses of investment proposition.

General economy.


Industry access.

Investor attitudes.



Market capitalisation.

Number of competitors.

Pension fund.

Political factors.

Position in industry.

Potential legislative changes.

Quality of management and employees.

Quality of resources.

Size of industry.

Success as a state owned enterprise.

Type of state owned enterprise, sector and industry it is in, products or services (and others).
Once it was decided which themes are relevant and important to produce the best privatization offer, you would have to have put the best privatization communication policy in place, supported by structure (who will strategize, project manage and create). And, systems to reach targeted stake holders audiences.

Bear in mind that investors alone cannot be target as an audience. State owned enterprises themselves have many stakeholders beyond the government as owner of the entity. So does the investor. Stakeholders can include:

Action and pressure groups in the financial world globally and domestically.

Central Banks (Government).




Financial community.

International and domestic contacts and multinational investors.

Large Institutional investors

Legislative bodies and regulators.

Opinion leaders in the financial world (the mass-media, financial services boards, banking councils etc.).

Sizeable private investors.

Stockbrokers and financial analysts (sell side analysts, buy side analysts, portfolio managers, registered retail brokers).
The systems, be internal (government communication agencies) or external (such as a large investor communication agency as a one stop system), or the government owner himself (or in partnership with the large agency), would have to have the capacity to activate effective privatization investor communication employing any of these following mediums, in line with the overall privatization communication strategy:

Advertising (e.g. Newspapers, Television, Radio etcetera.).

Analyst reports.

Analysts meetings.

Annual corporate and integrated corporate reports.

Annual general Meeting (AGM).

Articles in financial magazines.

Brochures and flyers.

Broker fact books and sheets.


Direct mail campaign.

Documentaries on Television.

Exhibitions and trade fairs.

Infomercials on radio and TV.

Interpersonal advocacy (lobbying).

Media publicity in business newspapers sections (releases and press conferences).

Public appearances and speeches by the owner.

Seminars and training events.

Special supplements with strategic content.

Supplements in publications and magazines.

Talks on radio.

Telemarketing project.

Web sites.

Prospectus or offering memorandum.
Mention of a prospectus or offering memorandum needs to be highlighted. Often these communication mediums are viewed as the only investor communication tool one needs to get the investor interested. To comply with legal requirements globally, you have to compile and register a prospectus with the relevant authorities and regulators, but, effective investor communication depends on the right communication mix, which answers to the intent on which the overall strategy should have been based on, from the outset. It therefore goes way beyond only mailing a prospectus to the targeted audience.

The financial and investment world is fast paced. Investor communication projects should be implemented on-going and be in step with investor sentiments.

Effective implementation of investor communication projects could make or break the final selling transaction of the state owned enterprise. It is therefore advisable for the entity to rather form a partnership with a very large reputable investor communication agency to implement the investor communication using both government internal and external capacity.

Monitoring of the privatization communication thrust and feedback to the relevant stakeholders is crucial. With a very large transaction at stake, often large decisions needs to be made to either eliminate or prevent events that can jeopardise the deal.

Pertinent to the impact of media coverage, positive media coverage serves as a very powerful indicator of a successful investor communication. The inverse is equally true! Negative publicity would needs proactive corrective action.

There are a variety of other investor communication monitoring tools which can be used to monitor the real and potential effectiveness of investor communication. Spot check surveying is one.

Data from monitoring of the privatization communication should be fed back into the entire privatization thrust to ensure that there are no surprises or wrong decisions are made during the final two steps of changing ownership from government to new owner.

Perhaps one can use the above to explain how important the importance of privatization intent and privatization investor communication would be, by way of using a country specific case choice being South Africa!

South Africa has many state owned enterprises suitable to attract particularly those interested in foreign direct investment. New owners do not need to start over in establishing a brand new company as SA state owned enterprises are historically well established), but have to overcome the obstacle of intent by the reigning government (it would have the support of many stakeholder once the current paralysis caused by politics is bridged).

Clear intent from government to grab the privatization bull by the horns would unlock the entire privatization thrust but probably end with varied offerings to those with the necessary investment capital and expertise, be it domestically and globally. A one shoe fits all privatization plan does not exist as you would learn from the overall process in countries where privatization were implemented.

Intention, viability studies, followed by stakeholder-engagement and communication, clear privatisation plans for its state owned enterprises (notably SAA and Eskom and a host of others) would put privatization on the right path.

Viability studies would in detail cover how well SAA and Eskom are run measured by sound business principles in order to achieve an acceptable return, by commercial standards, on capital employed and assets managed using international standards.

SAA, Denel, Eskom and Transnet (and a host of smaller state owned enterprises) claim to have done studies to the effect, which shows them in their own minds, they are in fact sound in terms of how the state owned enterprises are run which would in their own words, put them back on track in the medium term.

Financial figures, boardroom scandals, poor operational efficiency and constant dependency of bail-outs from government with loans and guarantees feeding back to tax money and public pension savings, refutes their comment!

Proper independent viability studies by a multi-disciplinary team of local and international experts, using international standards methodology, would be needed to get to the bottom of problems at SA's state owned enterprises (and SOC's for that matter). Investors would be very interested in the results of such independent study.

Results would guide top decision making on the way forward. Interventions to solve problems identified in the independent studies will have to be drafted, implemented and monitored for its effect on the state owned enterprise performance.

Right here there might already be a problem. Looking at SAA and Eskom and for that matter, each and every state owned enterprise in the country, it appears that recapitalisation with scarce taxation money is viewed as the ultimate intervention to save these SOE's.

In the end SAA and Eskom for instance gets the additional funds, only to continue in its old ways. They then approach government for another bailout not long after they receive money.

What and the How of what needs to be done in these state owned enterprises to take it from a poor performer to a proposition to investors, would be greatly influenced by the board and their claim to independency and mandate to take decisions.

At both SAA and Eskom there had been serious boardroom trouble, over a fair time, making it not a once of event. It speaks volumes and in many ways explains the current situation they find themselves in.

Next layer to penetrate if privatization is to succeed would be management and then employees. Both would be expected to change mind set and behave another way! At these levels interventions could be blocked or procrastinated. One should never underestimate corporate culture.

How would one hypothetically describe the corporate culture of SAA and Eskom? At the top, the constant request for bailout speaks of entitlement. At managerial level one can assume some are overpaid and underworked and at employee level it is difficult to say. Are employees only holding onto a job or are they committed to earning their salary?

One need to ask whether conversion from poor to something attractive to investors, could be done by the old decision-making regime in these state owned enterprises!

External experts exercising the necessary objectivity need to be brought in to ensure problems are solved and interventions would have a sustainable impact.

Investors would follow the impact of these interventions carefully and measure them against bottom-line results. A swing from poor, to improved performance, would stimulate investor attention and interest.

While the state owned enterprises are improved towards operating more effectively, 강아지쇼핑몰 in the background, politicians would work on legislation to deregulate and facilitate the state owned enterprise ownership transfer into private ownership

/>Investors and government alike would watch the balance sheet of the .state owned enterprise

/>Given the balance sheet shows enough improvement to make the state owned enterprise a proposition to investors, corporate finance, corporate legal and privatization investor communication expertise would be brought to the table

/>Then, what is the point made here? The point is, for privatisation to commence in South Africa, government intent is needed

/>Further reading:


/>Corporate finance articles/privatization:

/>South African economic remedy article.

/>Privatization, taking bull its horns article.

/>Privatization: corporatization commercialization first article
/>Irwin, T and Yamamoto, C. Organizational Culture and Performance. The World Bank, Discussion Paper No. 11, February 2004

/>Misheck Mutize. Why listing South Africa state-owned enterprises is not the solution. University of Cape Town web site

/>Welch, Dick (1936). The case by case approach to privatization: techniques and examples / Dick Welch, Olivier Fremond. World Bank technical papers, no. 403

/>Roodt holds a D.Phil. (in the study field of Organisational change management, economic change (commercialization and privatization and, inward and outward corporate communication), a Diploma in Marketing management, and have completed a Program in Strategic Management and Program in Investment Analysis and Portfolio Management. He also completed subjects in corporate finance, corporate law, risk management and corporate governance. He is founder-owner of MCR Advisors ™ and has worked as a business consultant in strategic research, strategic planning, business planning, marketing, 강아지쇼핑몰 strategic stakeholder communication and service management in the corporate market and small business market, for the past 19 years. Roodt in his career gained experience in a number of sectors. Primary sector experience includes Financial, Insurance, Public utilities, Local government and the small business sector. Secondary sector experience includes Banking and Service management