DAVID LEWIS: Any bets on SOEs’ shareholding leopard changing its spots?

Has there been a bleaker period in SA’s recent history? The brutal 1980s comes to mind, but this was at least tempered by the knowledge of certain victory eventually, which would — as the saying goes — bring a better life for all. The lost years of the Zuma administration were similarly mitigated by the knowledge that this too would pass.   

But now it’s difficult to find light at the end of a very dark tunnel strewn with violent criminals, perpetrators of corruption and coruscating incompetence, as well as inertia at the upper reaches of the state. 

I’ve heard the president’s appeal for hope, but it’s wearing thin. When I worked for Corruption Watch I was frequently asked whether I was optimistic or pessimistic. But I never thought in these terms. Problems there were aplenty, but I always viewed them as exactly that: problems, big or small, to which there were solutions. But now solutions are proving increasingly elusive. 

What are our gravest problems? Pick one: rampant crime and corruption, imploding public health and education systems, seemingly intractable levels of unemployment and inequality, huge housing shortages and the collapse of our key state-owned enterprises (SOEs), the latter responsible for electricity blackouts and water shortages as well as limping freight and passenger transport services. 

If they are able to, households and firms make alternative arrangements. Those businesses and households that can afford solar panels and generators buy them. Poorer neighbourhoods rely on candlelight. Small businesses shut down. Our mines, farms and industrial users of rail transport have turned to costly road transport that tears up the valuable road network. And this in the continent’s leading industrial economy. 

I struggle to think of major SOEs that remain on their feet. This undoubtedly owes much to the pillaging of these enterprises during the Zuma years, but their decline has continued under the present administration. However, it’s these problems that may offer the best opportunity for a relatively short-term fix. Our SOEs are potentially the greatest assets the state possesses. Not only are they responsible for basic household services, they are critical determinants of our economic competitiveness. 

Doesn’t happen

Possible short-term fixes for SOEs are largely related to governance issues. Here the application of Corporate Governance 101 would go far towards addressing the problem. The most basic of these rules specifies the responsibilities of the shareholder, the board and the executive management.    

The shareholder appoints the board and specifies the corporation’s mandate; the board converts the mandate into a strategy and appoints executive management; the executive management is responsible for realising this strategy in a set of concrete action plans. Each should stay in its lane. But it doesn’t happen regarding SOEs. 

Most damaging is if the shareholder minister and their department interferes with the board in its strategy-setting function and, particularly, in the board’s responsibility to appoint senior management. Indeed, ministers frequently engage directly with executive management over the head of the boards they have appointed. And boards often invade the responsibilities of management, such as when the Zuma-era Eskom board formed a board procurement committee, thus usurping a major management responsibility. 

At times this interference is aimed at gaining access to the resources of the corporation; it is also simply predicated on the ministers believing they are a more competent strategist or manager, this in turn worsened by the knowledge that political pressure has lumped them with a lousy board that cannot be relied on to exercise key functions. Lousy boards appoint lousy management. So there’s some justification for interference by an otherwise honest minister, but it’s no way to govern a corporation.

Delicate balance

I have served on two large SOE boards, under several ministers. I served on the Industrial Development Corporation board during Alec Erwin’s ministerial tenure, and on the SAA board under Barbara Hogan. Erwin and Hogan trusted their appointees. They appointed boards with a healthy mix of private sector experience and a number of economists with pertinent appreciation of the public interest served by these corporations.

We learnt from each other, and we understood the one truly complex element in the direction of SOEs — the need to maintain the delicate balance between the public interest and commercial considerations, the latter to restrain reliance on the fiscus. Identifying and maintaining this balance is challenging, but it’s not rocket science.

When Malusi Gigaba replaced Hogan as SAA’s shareholder representative this respectful relationship between the three elements in the corporate governance framework collapsed. Gigaba undermined the board, and he and his advisers usurped the responsibilities of management. The rest is history. Most of the board resigned, fearful of the consequences of being unable to exercise their fiduciary duty. A corrupt shareholder minister then appointed a corrupt board chair. Experienced and honest managers were pushed out. The organisation was looted. Ultimately the airline was grounded. 

Most readers will have identified where the principal problem resides. For the corporate governance rules to produce their desired outcomes the shareholder has to be alert and honest. But the prospect of this shareholding leopard changing its spots is not encouraging. The SABC — another severely threatened SOE — has not had a board for five months. 

Who will be fool enough or brave enough to become CEO of Eskom, and how long will it take to make the appointment?  How I wish André de Ruyter had sued energy minister Gwede Mantashe for suggesting that he was engineering load-shedding to get the ANC removed from power. 

And what is one to make of ANC secretary-general Fikile Mbalula’s incredulity at the very notion that corruption at the highest ranks of the ANC and government underpinned such extensive corruption at Eskom?  When the names are named Mbalula will eat his words — provided, of course, that he can extract his foot from his mouth. 

The alternative is the dreaded “p” word. I have no ideological attachment to privatisation. But with a weak and corrupt state that has proven incapable of running large, complex corporations, the question of ownership must be on the agenda.  Essential household services like water, passenger transport and household electricity should still be provided by properly governed SOEs. 

While the decision to partly privatise SAA is to be welcomed, does the state really have to retain a large minority in an enterprise operating at great locational disadvantage in an intensely competitive market? SA gains no strategic advantage from owning an airline. Similarly, the ownership of freight rail lines should be closely examined. 

We’ve got to get this right. We’re confronting state failure. It’s past time to start finding solutions. 

• Lewis — a former trade unionist, academic, policymaker, regulator and company board member — was a co-founder and director of Corruption Watch.