By Bheki Mfeka
JOHANNESBURG – Retrenchments in state-owned entities (SOEs) can be averted within the broader scope of their reforms. In particular, they must be focused on their developmental role, which when accomplished (where there is end-state) they can be repurposed as a rationale for their existence.
Retrenchments, especially within section 189 of the Labour Relations Act, for operational purposes must be understood to be more suitable for private sector not SOEs. Within SOEs retrenchments can only happen where there is a logical approach to reskilling and redeployment elsewhere within the state, or opportunities by the private sector where it is privatized.
SOEs by their nature are developmental entities, even though others operate in commercial spaces where they are required to make profits and fund their activities through their own balance sheet. It has been over the past 26 years where we have seen commercial SOEs struggling to perform at profitable levels, whilst their contribution to skills development and training has declined significantly.
SOEs such as ESKOM, TELKOM, SASOL, SABC, and DENEL were known for providing extensive world class experiential training to artisans, technicians, and engineers in their training facilities. With the introduction of SETAs and learnerships which substituted apprenticeships this quality training weakened in SOEs.
The developmental role of SOEs should be a much-sophisticated economic intervention which positions SOEs as contributors and generators of capacity for not only themselves but for markets and industries that are linked to them. It is this developmental function that contributes to skilling and reskilling and averts the need for SOEs to retrench.
The convolution in PFMA scheduling of SOEs, an example SABC is scheduled as a commercial entity and has to compete and 100% rely on its own balance sheet yet it has a massive developmental role with its Living Standard Measure (LSM) targeted at lower income classes, and the collapse of the licensing system; means that the public broadcaster is depleted and unable to perform its duties effectively.
Its contribution to the development of creatives and productions companies has declined significantly over the years. This denies opportunities for massive advancement of emerging talents that is yearning to access mainstream media and contribute to job creation and poverty alleviation. The spinoffs for properly funded public broadcaster are vast for local talent internationally.
The peripheral view of the developmental role of SOEs evidenced by unfunded mandates in a so-called developmental state makes the reason for existence of SOEs hard to justify when they operate in competitive industries. Why should SABC compete with Multichoice, or e-TV, if it is a public broadcaster. Are we not convinced about the value of a developmental mandate for SABC?
The government similarly with SAA, ESKOM, and TRANSNET has put so much pressure on their operations to fulfill developmental mandates yet they are expected to be commercially profitable and compete for ‘lucrative’ business that would be snatched away by more efficient private entities in industries where there is no state monopoly.
These three SOEs are caught up in that scenario where the crucial developmental mandates are not funded. Whether you are talking challenges about SAA’s unprofitable but ‘developmental’ routes, non-payment of electricity tariffs in SOWETO and other poor Municipalities, challenges with access to ports by previously disadvantaged businesses, black business in particular; the pressure is mounting.
Yes, whilst we are focusing on the corruption as well as recovery from COVID-19 pandemic, we need to move with speed to fix the mandates and put in place appropriate funding models within a properly conceived governance structures and oversight.
These interventions must follow the well-established principles for SOEs governance. For an example the rationale of state ownership must include among others the ultimate purpose to maximize value for society, through an efficient allocation of resources, and that, the state should define the rationales for owning individual SOEs and subject these to recurrent review.
Any public policy objectives that individual SOEs, or groups of SOEs, are required to achieve should be clearly mandated by the relevant authorities and disclosed. In any event if the role of SABC for instance is developmental, then it should be funded accordingly.
The developmental returns in many instances far supersede the simplistic profit returns which governs commercial entities or the private sector. In many instances if well-conceived and funded, it can provide bigger returns for society through taxes as a result of wide-ranging contributions to enterprise development, skills development, and employment creation in the society.
These must be calculated through an intensive socio-impact study that will tell us exactly how much would SABC or any other SOE need to fulfill their developmental mandate. The perception that developmental mandates are inferior and similar to welfare must be completely erased in as far as SOEs are concerned. The developmental mandate is inferior only where corruption and politics instead of science and proper governance, interfere with operations of SOEs.
Key to the state’s role as an owner the government should allow SOEs full operational autonomy to achieve their defined objectives and refrain from interfering in SOE management. The government as a shareholder should avoid redefining SOE objectives in a non-transparent and non-scientific manner.
The conflict that play out in the media where the board and the shareholder representative (the Minister) convey conflicting messages about retrenchments is a bad signal to the society that there is weak oversight. SOE boards should effectively carry out their functions of setting strategy and supervising management, based on broad well-conceived and funded developmental mandates and objectives set by the government.
A private sector approach to retrenchment does not work in the public sector. This is because key to SOEs’ reason for existence is to enhance job creation not only for itself by for the industry or markets as a whole. They can only retrench where their rationale for existence ceases, and the private sector can guarantee sustainable employment upon privatization of the SOEs. In the absence of this the rationale for retrenchments can be attributed to failure to plan and reason the significance of sustaining jobs.
In the context of SABC, the conundrum is the business model that no matter which CEO or board you can appoint, the market at this stage does not allow for an unfunded developmental mandate.
In a review of SOEs I was fortunate to be part of, we singled out SABC’s mandate as long been compromised. Firstly, in terms of its classification as PFMA Schedule 2, which denies it funding from government, and secondly, its TV license collection mechanism, which has been let to collapse years ago. SABC has been let alone to dry in a cut-throat competitive market. SABC may not be able to defend and articulate this to politicians that developmental costs are a drain to its existence.
Dr Bheki Mfeka, is the CEO, Economic Leadership Advisor and Strategist at SE Advisory | Twitter: @bhekimfeka | Website: www.seadvisory.co.za | Email: [email protected]
BUSINESS REPORT