Surely we can fix this? Our state-owned enterprises (SOEs) are killing our national wealth, but it doesn’t have to be so. Where they’re not monopolies like Eskom, they’re potentially innovative and valuable, like Denel. There are luxuries like SAA, and potential lifesavers like the SA Post Office.
They all do different things and all need different strategies. But they have a lot in common. They all need experienced and battle-hardened leadership. They all need to make profits because their role in a developmental state should be development. They are not job creators. They are there to provide dividends for the state.
It is clear our SOEs need less political interference. Cyril Ramaphosa should manage the transition. His cabinet colleagues have done a broadly solid job of clearing out the thieves. But that doesn’t mean they know what to do next. Nor should they. It shouldn’t be their job.
Take Prasa, the passenger rail agency; a perfect catastrophe. We need the state to run rail. In the UK, privatised rail is failing. So after state capture is halted in its tracks, Prasa is rid of its rotten executives and gets new ones. One of them, new CEO Nkosinathi Sishi, is a civil servant seconded from the department of transport earlier in 2019 after the early departure of another bureaucrat who used to run the Durban municipality, who had in his turn been welcomed into the Prasa job in 2018 by its chair with a stirring “we cannot over-emphasise what our expectation as a board is from the CEO. “Fortunately, with the kind of experience he has, we should not expect any difficulty in him executing the task at hand.”
He didn’t last a year. Now, his successor, the good Dr Sishi, stands accused, almost immediately upon starting the job, of trying to offload R400m worth of advisory work to the Development Bank of Southern Africa (DBSA).
“He unilaterally and secretly negotiated an agreement that allows (the DBSA) to extract management fees in excess of R400m for proposing and developing infrastructure projects for Prasa,” says a report.
Do not expect Sishi to stick around for long. The story was broken by one of the most meticulous forensic journalists of the age, Pieter-Louis Myburgh (of Ace Magashule book fame), and one of the most tenacious, Sikonathi Mantshantsha, for the Daily Maverick.
But what were Sishi and the other guy doing running a broken rail service in the first place? Mantshantsha reports new first-quarter figures showing that Metrorail conducted 40.7-million paying passenger trips. The target was 59.9-million. Of course, it got worse. Not a single item in either man’s CV suggests for a second they were suitable candidates to take a dying rail business and turn it around so trains could run on time and profitably. But surely that is the job? Both were appointed by Blade Nzimande.
For his part, public enterprises minister Pravin Gordhan’s most recent appointment — a former Treasury bureaucrat to run Eskom’s office of chief restructuring officer (go figure) — is equally weak.
This can’t go on. Surely, senior ministers in a Ramaphosa cabinet know someone who has taken over a loss-making company and turned it around? There’s only one way to do that, yes? It should simply be impossible for a politician to appoint anyone to run a state-owned company who does not have evidence that they have run, or been a senior part of running (and never in marketing or human resources!), a complex business and, in the process, produced a profit for their labours. If you can’t do that, you can’t help.
All around this country people run difficult businesses. Often they are white men, and an astonishing number used to work at the best business school in the hemisphere — SA Breweries. They made and sold beer profitably in countries with impossible languages, such as Poland and China, because they stuck to the basics. Executives like Graham Mackay and Norman Adami taught them. They are in demand, but not from the state. But they could fix the mess and produce profits for the state. And if you tell them they can’t fire anyone in the process, they’ll do that too.
Former Post Office CEO Mark Barnes put it well in his Business Day column this week:
“Experts, born out of experience from past failure and successes, risk-takers and judgment-makers, are the rulers of [the] commercial world. Don’t mess with them, don’t interrupt them, they have a tough enough time making good in the competitive worlds they have to survive in. They fight for capital, they compete for talent, they’re obliged to play within the rules. But they make money, they employ people and they pay tax.”
What more do you need? The politicians too often seem to want people running SOEs who agree with their withering insights on capital allocation or whatever, but at some point, even the most virtuous politician gets out of his or her depth in a business. You want to run a mixed economy? Fine, it can be done. But you’ll screw it up unless you appoint experienced and honest people to run it — and provided you know when to leave the room.
• Bruce is a former editor of Business Day and the Financial Mail.
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