Whoever coined the phrase “a fish rots from the head” had a deep understanding of the devastating consequences of poor leadership on organisations and institutions.
The phrase first appeared in the English language in the 17th century but still resonates today. Nations and institutions rise or fall on the quality of their leaders. The consequences of bad leadership are often dire, resulting in the downfall of institutions, organisations and even countries.
The phrase is especially applicable to SA’s key state-owned enterprises (SOEs), which over the past decade have been plagued by weak leadership and the erosion of corporate governance due to cadre deployment.
In its simplest form, cadre deployment is the practice of appointing party loyalists to senior positions in government institutions to ensure they carry out the political mandates of the party.
However, in SA cadre deployment has been used by the governing ANC to dispense patronage to party members, who are often hand-picked by party bosses to serve their and the party’s needs at the expense of the citizenry. These deployees are a key part of the patronage network that dispenses lucrative tenders and high-paying jobs to party members and their associates.
The unfortunate outcome of cadre deployment is that since appointments are not made on merit, skilled job applicants are overlooked. This has compromised service delivery and the financial viability of many public institutions and SOEs, resulting in some failing. At best, they drain the fiscus because they require constant financial bailouts to remain afloat.
There is another negative effect of cadre deployment that is insidiously destructive: it undermines the affirmative action policy that is meant to reverse the legacy of past racial discrimination against black South Africans, as competent and deserving black professionals are often overlooked for senior jobs in the public sector in favour of loyal cadres, some of whom have no expertise.
It therefore comes as no surprise that South Africans are growing weary of appointments of directors to the boards of SOEs, where the government has in the past deployed loyal yet unsuitable cadres. SOE board directors need a range of skills and expertise to make strategic decisions and oversee operations. They need financial acumen, industry knowledge, leadership skills, risk management expertise, and legal and regulatory knowledge.
We have recently witnessed politically motivated delays in the appointment of boards or board members at key SOEs. The SABC was without a board for six months due to political interference and disagreement over the make-up of the public broadcaster’s board, while the SA Tourism board has been dissolved by tourism minister Patricia de Lille after a spate of resignations linked to the controversial R1bn Tottenham Hotspur sponsorship deal and excessive fees paid to board members.
In the case of the SABC, former communications minister Khumbudzo Ntshavheni and President Cyril Ramaphosa played a prominent role in the controversy surrounding the original list of 12 directors nominated to serve on the broadcaster’s board. Ntshavheni wrote to parliament objecting to the inclusion of former SABC head of news Phathiswa Magopeni, while Ramaphosa delayed the ratification of the new board.
Ramaphosa’s deliberate dithering was also fuelled by ANC MPs, who closed ranks with Ntshavheni to try to block Magopeni’s selection. The impasse was only resolved after the office of the state attorney provided a legal opinion affirming the selection of the original list of candidates. Ramaphosa was left with no option but to appoint the nominated board, including Magopeni.
Partially state-owned telecommunications group Telkom recently filled the vacant board chair position with the appointment of Geoffrey Qhena after Sello Moloko stepped down at the end of March. At one point Mteto Nyathi, who was appointed to the Telkom board in July 2022, was touted as a potential replacement for Moloko.
Telkom, a JSE-listed company that is 40.5% owned by the state, has had its own fair share of ructions caused by government intervention in board appointments. In 2012 then communications minister Dina Pule controversially tried to block the appointment of four independent board members at an AGM and replace them with acolytes. Last year, Ntshavheni’s name came up again when she tried to pull off a similar move by voting against the election or re-election of five directors at the AGM, including Nyati.
However, the five directors were ultimately appointed after other shareholders outvoted Ntshavheni. Given the government’s history of meddling with board appointments at SOEs, South Africans must hope there will be no further interference with Telkom’s plans, which include restructuring the company and laying off 15% of staff to boost competitiveness and profitability.
SAA is another SOE to watch following the appointment by public enterprises minister Pravin Gordhan of an interim eight-member board chaired by ANC veteran and former tourism minister Derek Hanekom. The board’s appointment was heavily criticised by metalworkers union Numsa on the grounds that it was not transparent. The interim board will serve until the introduction of strategic equity partner Takatso Consortium, which is expected to take up a 51% stake in SAA.
The rot at the top is not limited to the public sector. It extends to the private sector, where some major corporates have not covered themselves in glory either. We have seen highly publicised corporate scandals in which senior executives at JSE-listed companies such as Steinhoff and Tongaat Hulett have been implicated in accounting fraud that has resulted in investors losing billions of rand. But we have seen more general governance degradation in the public sector.
Given the ANC’s atrocious record in managing SOEs, it could learn a thing or two from the Communist Party of China (CPC), which has built SOEs that are outcompeting and outperforming private sector corporations globally. They have been so successful that they dominate the Global Fortune 500 list of the world’s largest corporations. In 2020 China surpassed the US as the country with the highest number of companies represented in the Fortune 500. In 2022 China was home to 136 companies (the overwhelming majority of them SOEs) in the Fortune 500, beating the US, which was home to 124 companies.
The CPC does not have a magic wand that makes Chinese SOEs profitable, efficient and globally competitive. The governing party simply deploys competent, ethical and patriotic officials to its SOEs instead of incompetent and underperforming party loyalists as the ANC has historically done.
Unlike the ANC, the Chinese deal harshly with incompetent and corrupt officials that compromise the integrity of their SOEs. The disastrous practice of cadre deployment has made our SOEs dysfunctional, contributing to the relegation of the SA economy to a basket of countries that are globally uncompetitive and unattractive to investors.
As the ANC gradually loses its grip on power, will it repent and take a leaf out of the book of the CPC? Or will it double down and disregard ethical governance and meritocracy completely? Only time will tell.
• Ntingi is founder of GetBiz.
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