Mtho Xulu, president of the South African Chamber of Commerce and Industry (Sacci), says if the deadlock over taxes which derailed last week's budget forces the government to see the country's fiscal crisis for what it is and take urgent action, it will not be a bad thing.
“We're saying that cuts to expenditure rather than more tax increases can no longer be avoided. What we're also calling for is rationalisation of spending with more focus on efficiencies and productivity so the state gets value for what it spends. We need a clear demonstration of this,” he said.
Too many state entities continue to spend vast sums “while running into trouble with the auditor-general year after year” for fruitless and wasteful expenditure, he says.
“It is time for us to ask how many of these entities do we need. Can they show us what efforts have been made to rationalise their spending, and how that has contributed to a culture of responsibility.”
State entities that may be “nice-to-haves” but aren't affordable, must go.
“There are very important SOEs like Transnet, Eskom and the like that must be protected, but there are still another 800 or so state-owned companies each with boards and executive committees and all sorts of people earning huge salaries. We need to ask how many of them do we really need.”
The current number of SOEs is clearly unsustainable, he says. Many have similar mandates that can be merged with others.
“Let's focus on closing those with obsolete strategies or mandates, entities we don't need but just keep because someone needs a job.”
So-called “implementing agencies” whose impact on society is minimal must be scrapped. Their mandates, if they still serve any purpose, must be passed to the department they supposedly serve.
“At a time like this you really need to focus on your core business and take a knife to what is non-core, non-essential and serves no purpose other than providing jobs and salaries.”
Make sure everyone who goes into public service is qualified. Apply the same standards to everyone. You should not get a job because 'we know you'. You must get a job because you have a particular skill set, and then be held accountable based on the value you add
— Mtho Xulu, South African Chamber of Commerce and Industry president
As for continuing to bail out dysfunctional SOEs “we must turn the corner on that. No more cash must go to SOEs for bailouts, let them rather come up with turnaround strategies. Let them go to the market and earn revenue to fund their strategies. There should not be any quick cash.”
Creative ways need to be found to support SOEs that demonstrate that they can be turned around and are able to appeal to other sources of funding than cash handouts from the state.
Private sector investment is the lowest hanging fruit, Xulu says. The government could give them concessions but still control the strategic policy framework to protect their taxes. “That's definitely the lowest-hanging fruit given the fact that over the past 24 months the private sector has been heavily invested in structural reforms the government has been working on.
“Speed up the reforms, commercialise, give concessions. Let the private sector invest in some of the core businesses of the state and make them more efficient and more productive.”
Impeding efficiency and productivity is cadre deployment “because it's an easy way for people to get into positions they're not qualified for”, he says.
“Let us sign off on the professionalisation of the state. Let us do a massive audit of the skills set we have in government and the skills we need. Make sure everyone who goes into public service is qualified. Apply the same standards to everyone. You should not get a job because 'we know you'. You must get a job because you have a particular skill set, and then be held accountable based on the value you add.”
Commenting on a report this week that the board of SAA has been instructed by transport minister Barbara Creecy and the ANC deployment committee chaired by Deputy President Paul Mashatile to appoint as the new CEO the lowest scoring candidate interviewed by the board, he says SOEs must be held to the King codes of corporate governance.
“That means that the job of appointing the CEO belongs to the board. We do not believe that shareholder representatives [ministers] should be giving instructions to the board. It should be left to conduct its own processes and get the best candidate for the job in terms of their strategy. The strategy and executive oversight lies with the board. Once you bring in other elements it undermines corporate governance and leads to the problems we've seen at SOEs.”
Laws that give power to the minister to appoint CEOs from a shortlist provided by the board must be done away with, he says.
“The credibility of the government's SOE turnaround promises relies on the quality of leaders that are going to be appointed moving forward. If there is any trace of unlawful instructions coming in from the side, and the board is forced to take decisions they don't believe are viable from a commercial and strategic point of view, then we are moving backwards.”
The Sacci's position is that the board alone should appoint the CEO without influence from any other body.
“Shareholders appoint boards and boards appoint managers. That's very crystal clear in corporate governance in South Africa. We need to lean on these standards of corporate governance. They're internationally recognised, so why are we not using them in our state-owned companies?”
If the GNU can't agree on cadre deployment it should be referred to its so-called clearing house. The fact that the chair of the clearing house is ANC deployment committee chair Mashatile is “problematic”, says Xulu. “Maybe we need to interrogate how this clearing house is set up. It's probably as important as the cabinet itself.”
Talking of which, the country cannot afford such a bloated cabinet, he says.
“It's massive. The belief that every political party no matter how small must be accommodated in the cabinet is flawed. We need to decide what government departments we really need, how many of them require two deputy ministers and what do they actually do.
“We must remember that every cabinet minister and deputy minister has a support staff, so it's a very expensive operation to run. Instead of having this amount of support for ministers and deputies we should make more use of the DGs and deputy DGs in their department who are also very highly paid officials.
“These are some of the hard decisions our GNU has to make.”
And even more than the VAT standoff last week, they will be “the true test” of its resilience, he predicts.
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