Over the past month the government’s commitment to chaos has escalated across the key state entities in the public enterprises portfolio. Transnet and Eskom — the twin albatrosses of the economy that are simultaneously too big to fail and too big to fix — have been subjected to yet another round of leadership chaos.
Three years ago Portia Derby stepped into the hot seat at Transnet with the mandate of initiating its recovery from the decade of discord and discontent that had been engineered by the foot soldiers deployed by the ANC and its pliable associates and enablers from the private sector. The mission to undo the decade of corruption and clean out the company should have been one of the key performance indicators alongside the sustainability and viability of the organisation.
Derby’s track record in the public service, rather than her technical skills, meant that her best chance of running an entity like Transnet lay in the ability to hire and retain hard-core technical specialists who would have enough insights into the business of things that move to be able to ensure that Transnet could actually deliver on its operational mandate.
Regrettably, the pursuit of cost management resulted in the adoption of a voluntary severance package mission, which in theory tends to be an elegant way of managing costs. The problem with voluntary severance offers is that they tend to be more appealing to those with skills that are in demand elsewhere. Experienced specialists who can ply their trade across different entities and jurisdictions benefit from offers of a voluntary severance package as they not only get the favourable tax treatment associated with severance benefits rather than resignation, but also get to run away from a company in crisis.
The result, as former Post Office CEO Mark Barnes recently observed on these pages, is that the company loses some of its best and retains the less desirable simply because they are barely appointable elsewhere (“Voluntary severance packages don’t work and never will”, October 5). Transnet seems to have inadvertently vaulted itself into this conundrum, with noble intentions that were predictably self-defeating.
Rather than find a seasoned rail or logistics specialist to run Transnet Freight Rail, the heartbeat of the business, Transnet opted for Siza Mzimela — more seasoned in aviation transport than the dirt of the tracks. That lack of intimacy with the business, coupled with the loss of critical skills, made the job of keeping the business profitable far more difficult.
More alarming was the failure of politicians to play their part in the Transnet fix.
While Derby had been hired to run the business in the aftermath of the capture years, the most pervasive effect of state capture on Transnet related to its locomotives contract with the China Railway Rolling Stock Corporation. The tainted contract, and the Chinese company’s discretionary approach to compliance with tax and financial laws of SA, created an operational and maintenance stalemate that neither Derby nor Mzimela could ever fix.
When exogenous factors like the theft of infrastructure and the July unrest occurred, they found a company so fragile it had no credible response and could only surrender by declaring force majeure no fewer than six times in 18 months. At that stage one would have expected the board to accept that something major needed to be done to change Transnet’s fate.
Surprisingly, it took the publication of the inevitable consequence of a failing business — the loss for the year ended March 31 of R5.7bn — for the public enterprises minister to issue a directive to the board to assess the suitability of executives to actually run the company. As one would expect, the executives were found wanting.
Hopefully, the board will henceforth exhibit an understanding of the effects of ongoing problems on the business rather than wait for the financial accountants to confirm the reality before taking the painful but necessary decisions.
• Sithole (@coruscakhaya) is an accountant, academic and activist.
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