Sipho Maseko says his success in turning around Telkom would not have been possible without a strong, supportive board that shielded him from government interference.
This allowed him to make the unpopular decisions without which it would have gone down the tubes. And there's an important lesson here for other state-owned enterprises, he says.
The state-owned telecoms group posted a 22.6% surge in full-year earnings this week, and its shares rose 13.6% to hit a high of R98.20.
Key to his success was having "the right board", which interceded firmly between management and its biggest shareholder. Before this, the government, which today has a 40% shareholding, disastrously interfered with executive decisions.
"I had a gift," says Maseko. "The board gave us the right support, the right air cover so we could make the kind of decisions we've had to make, some of them very difficult."
Telkom cut more than 2,000 jobs last year and reduced permanent staff by 12.5%. This came on top of retrenchment cycles that reduced the head count in its main consumer business, Telkom Company, from more than 21,200 people in 2013 to 9,952 last year.
"Job cuts were not the easiest of decisions, but we were staring down the barrel of a gun. The company was in terminal decline, we were losing revenue on a compounded rate of 2% a year, our costs were out of control, we were never going to get a bail-out from anyone, we'd been left behind by our competitors," says Maseko.
The biggest challenge facing him when he became CEO in 2013 was state interference, which had sabotaged the efforts of his predecessors.
Having a board that shielded him from this was key. Without such a board, the chances of other state-owned enterprises replicating Telkom's success are minimal.
I really felt for Phakamani … Back your man, don’t gainsay him publicly … it undermines the entire structure
"You need the full support of your board, which must be able to intercede between management and shareholder. The role of the board is important, it's not just ceremonial. It helps us secure the right alignment with shareholders on an ongoing basis," Maseko says.
As well as being fit for purpose, the board must understand its role.
"If you have been brought in as CEO, the board must absolutely trust your decisions. If the board second-guesses you, or if the board wants to decide, or let the shareholders decide, then the board or shareholders must run the company."
Having an effective public-private partnership is necessary for a successful state-owned enterprise, but not sufficient, he says.
"It's all about governance, the right board, the right board support. Even if you have the right public-private partnership on paper, if you don't have the right board support it's not going to happen."
Telkom's remarkable success has been built on the back of its burgeoning mobile business. But embracing mobile met with considerable shareholder resistance, especially when it wasn't going well. The group came close to pulling the plug on its mobile business several years ago, he says.
"People don't realise how easily we could have taken the wrong decisions, done the wrong things, without the board support we had."
Key to Telkom's success is that the government "was not able to overrule the board or the CEO".
He contrasts his situation with that of Eskom's outgoing CEO, Phakamani Hadebe, who enjoyed no such support. When he tried to curb costs with staff cuts and zero wage increases, he was publicly overruled by his state shareholder in the person of public enterprises minister Pravin Gordhan.
"I really felt for Phakamani," says Maseko.
Without public support from shareholder and board, even good CEOs of state-owned companies cannot succeed.
"Back your man, don't gainsay him publicly. If you don't agree with him, pull him into a room and talk, but don't gainsay him publicly. It undermines the entire structure."
Maseko says the continued growth of Telkom's mobile and fixed business is dependent on a growing economy, and for this the government needs to come to the party.
"The growth of data consumption is what will change the economy. The more we don't adopt and invest in high-speed connectivity and digitise our public sector and private sector services, the more we'll be left behind."
After more than 14 years of dithering, the government needs to release high-frequency spectrum in a way that enables competition and improves access.
Bridging the digital divide needs to become a government programme, he says.
"We need a package of interventions, rather than just a red line of regulation, to move the country forward."
Investors in the digital economy need certainty and predictability so that they can allocate more of their capital to move the country forward.
"We have the policies, we need to move to execution. We need to implement, we need much faster decision-making. We over-consult. Every time there's a change in the ministry we start afresh, we don't build on the platform of people who came before."
His level of confidence in the New Dawn is high, based on what he says he believes is "the realisation that we're running out of time".
"For instance, I don't think there's disagreement that we need to allocate spectrum. Now it must be done. Existing policy and legislation is clear. We're tripping ourselves up by seeking to invent new legislation or new policies. There is no need to invent new things. There is a designated process that is catered for both in policy and legislation."
The small and medium enterprise sector is crucial to Telkom's plans.
The opportunities and possibilities in this "most underserved sector in the country truly inspire me".
But unless small businesses can bridge the digital divide with access to cheaper data and devices, and faster, cheaper broadband, they won't be competitive and won't survive.
"So we're looking to create a different ecosystem to enable small and medium businesses into the future," he says.
"For as long as this sector is not competitive and not challenging the high levels of concentration in the South African economy, our growth will not take off."
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