Amid an energy crisis that is hobbling the economy and immiserating the populace, the minister responsible for public enterprises, Pravin Gordhan, took four months to decline the nominations for a CEO for Eskom recommended by its board.
It’s not clear how the board can continue after such treatment. Clearly it does not have the faith of the shareholder, and it’s perfectly reasonable to ask what on earth is going on.
For all Eskom chair Mpho Makwana’s faults — and they exist if André de Ruyter’s account of the chair’s conduct during the torrid last months of his time at Megawatt Park is to be believed — there can surely be no excuse for this. In a normal country this would be political dynamite. In SA we stagger on, punch-drunk, to the next crisis.
What remains of our economy has priced in load-shedding. It’s an inflationary drag, a cost to all of us, a debt burden, a destroyer of jobs — and yet another barrier to entry for any enterprising soul wanting to start a business. The real drama, as the National Treasury has been saying in ever more frantic tones, is the state of the fiscus, diminishing foreign appetite for bonds and debt costs — and, therefore, in an economy whose backbone is the export of minerals, the fact that the trains and the ports don’t work is by far the bigger crisis.
Not too long ago Transnet went on a bit of a PR blitz. It said its principal problem was the issue of the Chinese locomotives and the maintenance boycott by the state-owned Chinese company that won the dodgy tender to supply them. That issue was out of its hands, it said, and has not been fixed since. It turns out that this was only partially true. Transnet’s woes flourish like wildflowers on the West Coast. Coal lines, ore lines, container lines, pipelines and ports are all floundering.
Accordingly, on September 1 Gordhan admonished the Transnet board for the company’s woeful performance, ordering it to deliver a turnaround strategy within three weeks. In state-owned companies, turnaround strategies are like buses in countries that have functioning public transport. It’s OK if you miss one because another will be along soon enough. In this case they just didn’t bother. It was not delivered and CEO Portia Derby has been told to shuffle off.
What Gordhan plans for Transnet now is yet to be seen. It’s likely it doesn’t matter, as much as it doesn’t seem to matter what he wants at Eskom either. The ANC is in full-on election mode and that means organisationally the party’s centre of gravity is its secretary-general, Fikile Mbalula. He is a derisory figure for many because of his clownish incompetence in various ministries, but you’d be a fool not to recognise the man as a political operator. He and Gordhan don’t get on.
With the party fighting for its life next year, everything is seen through the lens of the election, including the appointment of a CEO for Eskom and the management of ports and railways. Amid legal challenges to cadre deployment — the process by which the ANC parachutes its people into technical roles for which they are seen as politically, not technically qualified — it’s a fact of history that the ANC’s deployment committee has not been disbanded. It wants to win the election outright, so it will do what it needs to do to keep unions, the communists and various other partners close while it can — and the implications of ongoing dysfunction for the citizenry and the economy can wait.
Gordhan would historically have got his way because he would have had political cover from the president, but the president is increasingly distant. Gordhan is an ideological man. He is not, as the peanut gallery is wont to claim, stupid, lazy or incompetent.
So, the only explanation I can fathom for the ongoing failure to appoint competent people to run these critical companies is political; he can’t appoint who he wants to run Eskom or Transnet because he can’t get it past the ANC. Despite the various workstreams involving representatives of businesses, I fear it is naive to expect progress until after the election. Then, perhaps, we can have a meaningful debate about how to fix the railways.
It might help to look at what worked and what did not work in other countries. The UK’s experience of privatising its passenger and freight railways is much studied, if vulnerable to ideological analysis. Brits like to complain about the railways, but that’s because they have no idea how good they have it. What was clear in the 1990s was that carrying on was not an option. State ownership since the 1940s had seen railway use by passengers slump from about 1-billion journeys in 1948 to 750-million by 1995, when a (flawed) franchising model was introduced. Since then journeys on UK railways have grown to almost 1.5-billion a year again.
The big lesson appears to be that it’s critical to be absolutely clear on the goal you have in mind. If you want to raise capital for the fiscus quickly, concession out the juicy monopolies and watch the private sector queue up with the big bucks. You will have to accept that these privately-run monopolies could be inefficient as well, so you have a tension between the desire to float at a good price and the desired policy outcome of improved efficiency.
If you want to grease the economy and reduce prices and opportunity costs, let operators compete for access to the lines and let the private sector get busy, producing more for the fiscus in the longer term.
Of course, it is unimaginable that this debate would even be possible in the current incarnation of the ANC. It can’t even appoint a CEO at Eskom amid this level of crisis. It’s hard not to surmise, therefore, that the only meaningful fix for Eskom and Transnet is an election.
• Parker is Business Day editor-in-chief.
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