What might the ANC hope to gain by moving state-owned enterprises (SOEs) such as Transnet and Eskom to their line departments?
A proposal to do so was one of the more controversial economic resolutions to emerge from the ANC national conference. It was a gathering about personalities rather than policy, with policy resolutions discussed only in a brief late-night session in December and their adoption delayed until last week. That means nobody is taking them particularly seriously as a guide to what the government might do. But this particular proposal could complicate efforts to tackle the two crises constraining economic growth and investment — in energy and transport.
Not that it is clear so far what the SOE resolution means. The ANC has yet to publish the final text of the resolutions. All we have are comments from the ANC’s leadership, along with the December draft. This says that SOEs that operate in specific sectors of the economy should be placed under the relevant government departments. It narrows it down to SOEs that are “critical to providing economic infrastructure that facilitates private sector economic activity”. The single example it cites is that transport SOEs must be under the department of transport.
This is odd because by all accounts the discussion that prompted the resolution was all about Eskom. There is a notion within the ANC that public enterprises minister Pravin Gordhan and outgoing Eskom CEO Andre de Ruyter have been distracted by all this green energy and just transition stuff, instead of focusing on fixing Eskom’s power stations. Move Eskom to mineral resources & energy minister Gwede Mantashe’s department, so the thinking goes, and he will make sure it is fixed — and that Eskom stops the load-shedding that could rob the ANC of its majority in the 2024 elections.
Mantashe’s ascendance at the conference, and his coal commitment and renewables reluctance, will also have helped fuel the push to give him control of Eskom. And the department of public enterprises has hardly covered itself in glory in terms of enabling the operational turnaround that Eskom, and SA, so desperately need.
But it is hard to see why Mantashe would get Eskom’s machines fixed just by the force of his strong personality, or turn around the energy availability factor by even more political interference. It is not as if he or his department has a fabulous track record. The bureaucratic obstacles the department has put in the way of rolling out new independent power generation are well known.
And it is not just in electricity. Many in the mining sector are Mantashe fans, but what has he really done for the sector in the five years since he became its minister? There is still no mining charter, nor a cadastral system that would enable new mining exploration. And of course, there is still no reliable, affordable electricity supply. Nor is there reliable transport to carry the sector’s exports of coal, iron ore, manganese and chrome to market.
And so to transport. At least the ANC and government now seem to recognise there is a problem there. And perhaps a better transport minister than Fikile Mbalula will be found once he goes off to Luthuli House. But his department’s track record is bleak. It already oversees the disaster that is the Passenger Rail Agency (Prasa); this clearly is not a department to which one would want to entrust an(other) ailing SOE, especially one as ailing as Transnet.
It is hard to know even where to begin. But when a company sneaks its financial results out on the evening of December 22 it is a signal something is very wrong. Read the fine print and it turns out Transnet breached its loan covenants with investors and had to ask for a waiver. Its rail performance was so bad that the cash the company generated did not adequately cover the interest on its debt. Fortunately, investors did not call a default. And at headline level the company managed to show a tiny profit, thanks to a couple of technical factors.
But the mining industry does not have the luxury of just waiving its contracts with Transnet. It accounts for more than half of Transnet’s total business and more than 80% of its freight rail business. The SOE’s dysfunction has cost the industry more than R80bn in lost exports and lost production over the past two years, at a time when SA’s economy should ideally have been placed to benefit from high commodity prices.
A letter uncovered by former colleague Lisa Steyn reveals the Minerals Council SA approached the Transnet board in December to demand urgent action to arrest the crisis. The council, which had earlier approached Gordhan in an effort to get some action, called for CEO Portia Derby and other key executives to be replaced, but it also listed a series of detailed steps to sort out malfunctioning rail and port services — and offered to parachute in industry experts to help.
The council did get a response: later in December the Transnet board and the council said they would set up “collaborate structures” to stabilise and improve Transnet’s performance. Whether anything will come of the new structures is yet to be seen.
The trouble is that too often government and the governing party look for structural solutions to what are essentially operational and management failures. Creating inter-ministerial task teams or new oversight bodies or shuffling responsibility for public entities around the place is not a fix for poor governance, poor management or poor policy. The SOE resolution is the ANC again clutching at structural straws in the hope that more political interference by different ministers might address deep underlying problems at SOEs on which SA’s economic fortunes depend.
It is doing so at a delicate time, when Eskom has to appoint a new CEO and Transnet’s management is under fire too. The government has spent years promising changes to the SOE landscape without anything much coming of it; the ANC’s proposal could end up going that way too. The risk, however, is that it adds an extra layer of uncertainty and instability that does not just fix what’s not broken but in the process breaks what needs to be fixed.
• Joffe is editor at large.
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