By Corrie Kruger
A STATE-OWNED Enterprise (SOE) is a legal entity created by a government to enable participation in commercial activities on the government's behalf. It can either be wholly or partially owned by a government and is typically earmarked to participate in specific sectors.
In South Africa, there are about 128 SOEs and other public institutions – the list can be viewed at: www.gov.za/about-government/contact-directory/soe-s?
Media have reported ad nauseam on the shortcomings at SOEs in South Africa, as newsrooms have filled with one horror story after another over the past 15 years. These entities have dismally failed the country and its people and exhausted the economy. At their root, a conglomeration of corruption, inefficiency, mismanagement and poor governance.
The list of SOE’s failures and mismanagement has made South Africa and the ANC, the laughingstock of the world. In a podcast by Isak du Plessis on YouTube on March 3, the presenter was unable to contain himself with laughter as he reported how the Post Office would no longer provide postal services to Russia and Ukraine.
He quoted a Facebook comment on this announcement by a person, who stated, “but… they cannot even deliver in Centurion”.
How did we get here?
A good place to start is examining the role of the head of SOE structures in South Africa. Currently that man is Pravin Gordhan, who holds the post of Minister of Public Enterprises. He has also previously served as the Minister of Finance, Co-operative Governance and Traditional Affairs and Public Enterprises.
The stated mission of the Public Enterprises Department is: “To create an enabling environment in which SOEs add real economic value by focusing on operational excellence, commercial viability and fiscal prudence. This will drive developmental objectives, industrialisation, job creation and skills development.”
This mission statement has totally missed its mark. It is a total contradiction of its anticipated aims.
State spending spree
When Malusi Gigaba was the finance minister, he maintained tight fiscal discipline, but warned that SOEs posed a financial risk to the economy, after he had no choice but to bail them out. Subsequent finance minister, Tito Mboweni, in answer to a parliamentary question acknowledged that: “The government has spent R187bn bailing out and recapitalising SOEs over the past two decades.”
All these injections achieved, however, was to provide SOEs with yet more time in which to continue looting and losing money.
Finance Minister Enoch Godongwana has now reiterated his commitment to clamping down on SOEs that are draining the fiscus with bailouts. Godongwana is, however, not yet ready to completely make good on his promise of tough love by starving them of more taxpayer-funded bailouts. And so, we sit on the sidelines and wait to see what unfolds…
The people entrusted to run SOEs
At the heart of the problem is the insane notion that anyone, no matter their qualification or experience, can become the head of these entities.
In comparison to other countries, South Africa falls woefully short of placing skilled personnel in positions of authority. Let us look to history, when South Africa appointed a primary school teacher to head up South African Airways (SAA) – Dudu Myeni – and the subsequent fallout. This a case in point.
Chief Justice Raymond Zondo’s state capture report now notes that former president Jacob Zuma could not explain how Myeni was appointed and retained as SAA board chair for five years.
The Organisation Undoing Tax Abuse (Outa) has since brought a legal case against Myeni, which has resulted in her being declared a delinquent director, ensuring she may never serve on any board, ever again.
The same fate should apply to more SOEs as well as private company directors. Other appointees that come to mind who should follow suit are Hlaudi Motsoeneng, Brian Molefe, Lucky Montana, Masango Abraham, Shaun Abrahams and a host of other officials with questionable credentials.
Professional leadership not political interference – please apply here
Researchers at the Fox School of Business at Temple University show that the optimal CEO tenure is 4.8 years, a figure backed up by Fortune magazine’s finding that the 500 largest US companies have a median CEO tenure of 4.9 years. As critical as the well-being of a CEO’s tenure is the question of who CEOs surround themselves with – weak or strong executives?
It should be as incumbent on the board to assess the calibre of a CEO’s executives, just as it is for the board to be independent, impartial and ensure governance is implemented and adhered to.
Several SOEs in South Africa have shown otherwise, however. There is ample proof that boards and executives at these organisations were replaced at will and for political reasons to enable looting and job creation for friends and relatives under the banner of cadre deployment. All, without regard for the necessary required skills, education level and experience, the disastrous consequences of which, we the people of South Africa, now reap.
Excluding the odd capital injection, additional costs are always passed to consumers – the rich and poor alike. These include higher electricity tariffs, transport costs, insurance premiums and the higher cost of imported goods.
There is no longer the luxury of hearing about turnaround strategies that never materialise. The time has come to mothball SOEs that are not necessary and fix the ones the country needs. To realise this, they require competent and professional leadership with little to no interference from politicians. We all know this to be true, even the politicians themselves, but it would seem they are not yet ready to relinquish their hold on the golden geese.
President Cyril Ramaphosa has said South Africa will benefit richly from emulating the model of Singapore and China – who implement a shareholder management structure to manage SOEs and return them to stability and profitability.
It is an open question, however, as to whether Pravin Gordhan is the right man for the job, or not.
Airports Company South Africa, Alexkor Limited, Armaments Corporation of South Africa (Armscor), Broadband Infraco, Broadcasting Complaints Commission of South Africa , Central Energy Fund, Companies and Intellectual Property Commission, Compensation Fund, Competition Commission, Competition Tribunal, Denel, Development Bank of Southern Africa, Eskom, Estate Agency Affairs Board, Export Credit Insurance, Corporation of South Africa, Free State Development Corporation, Government Employees Medical Scheme, Government Employees Pension Fund, Health Professions Council of South Africa, Housing Development Agency, Independent Development Trust, Industrial Development Corporation, Ingonyama Trust Board, Land Bank and Agriculture Bank of South Africa, National Energy Regulator, National Gambling Board of South Africa, National Home Builders Registration Council, National House of Traditional Leaders, National Housing Finance Corporation, National Lotteries Commission, National Nuclear Regulator, National Student Financial Aid Scheme, National Student Financial Aid Scheme, National Youth Development Agency, North West Development Corporation, OR Tambo International Airport, Passenger Rail Agency of South African, Pebble Bed Modular Reactor, Petro SA, Public Investment Corporation, Rand Water, Road Accident Fund, Road Traffic Infringement Agency, Road Traffic Management Corporation, South African Forestry Company Limited (Safcol), Small Enterprise Finance Agency South African Airways, South African Broadcasting Corporation, South African Local Government Association, South African National Parks, South African National Road Agency, South African Nuclear Energy Corporation, South African Post Office, South African Social Security Agency, Special Investigating Unit, State Information Technology Agency, Transnet.
Corrie Kruger is an independent analyst