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Analysis: Parastatals, the mess that could bring SA dow...

Business Maverick

Business Maverick, Politics

Analysis: Parastatals, the mess that could bring SA down

No, we're not joking or overstating the danger. In a country as tightly controlled by the state as this one is, the bulk of crucially important services is delivered by the enterprises whose efficiency, effectiveness and quality of delivery is tragically low. But wait, there's a commission that will sort out all our problems. One day. Maybe. By STEPHEN GROOTES.

Our state-owned enterprises (SOEs, or for the purposes of this article, parastatals) are in a complete mess. No one is going to deny it in public. And when we talk about mess we mean a wasting-billions, holding-back-the-country, putting-a-handbrake-on-the-economy mess. It’s bad. It affects everything; from how much power we have at the moment, to why the N3 after Pietermaritzburg is such a disaster and why are we still a decade behind the world in telecommunications. All of this is down to the fact that parastatals are paralysed. From Eskom to Transnet – name a parastatal, we’ll name a disaster.

What is one to do? Well, in the grand tradition of politicians, a review has been called for. You know the type, with someone worthy, from the law, to head it. And a group of experts to meet, chat, research, meet again, disagree, chat, make peace, fight it out all over again and then, at some future stage, make recommendations. The problem is, we all know that that’s all they can do. Recommend. Because the real decision won’t be made by them. That will come from President Jacob Zuma. Well, technically speaking, that would be the case; it will actually be made by the ANC NEC, the Esselen Park people.

The pity is that someone has gone to a lot of trouble to work out how this review will work. Normally, if you know that, and who will run it, then you should be able to guess the outcome. That’s a bit more complicated here.

Now, here’s the horror question: Did you know that at present, according to presidency minister Collins Chabane, there are “an estimated 300 SOEs”. That’s right, 300. And yes, that’s right, “estimated”. They don’t actually know how many there are. Or if they do, they’re too busy, er, lazy, to put it in the documents. It’s a bit like our land, no one really knows how much of South Africa is owned by government. It’s incredible, and it shows you just how big the problem really is. Add to that the fact that some of them report to the department of public enterprises (it has the pick of the problems, Eskom and Transnet) and others report to “various ministries, provinces and municipalities” and you have a really good recipe for trouble. We do expect some of the juicier stories to come from those owned by municipalities (think Johannesburg Roads Agency and potholes and traffic lights).

This review will take about a year, and has been given what the presidency calls “watertight” terms of reference. There are five main areas of study, referred to as “work streams”. They are:

  • Development and transformation,
  • Ownership and governance,
  • Viability of business cases,
  • Strategic and operational effectiveness, and
  • Research and development.

Note the first one, development and transformation. That would already appear to point to some serious ANC unhappiness. Transformation is a cover for a multitude of things, some of them good and absolutely necessary, unfortunately it’s also a call that’s been abused in cases like that of Siyabonga Gama, whose fight with Transnet was well publicised.

Government has put things more crisply in its problem statement. It has a list of issues it wants answered. Well, Mr President, you don’t have to wait until next September, just read along, we’ll give you the simple answers to what are quite complicated questions:

Are the failures of parastatals exaggerated?

No. They are not. They are huge. They are holding the country back. Maria Ramos has been at Absa for so long we forget she was even at Transnet once. And they still haven’t appointed a replacement for her. Eskom and the issues there threaten the entire country. Sentech seems to be battling to just keep afloat, Denel has lost barrels of money (in the arms industry, in which we shouldn’t be involved anyway), and don’t get us started on what happens at some of the municipally owned entities. If this isn’t sorted out, it will cripple the entire country, and pretty damn quick too. (Er, Stephen, why are you so gentle on them? – Ed)

Do they in fact perform worse than private firms?

Yes, they do. And catastrophically so. They certainly provide a worse service to the people than any private firm that is not a monopoly. While we’re sure you could find some private firms that are worse, on the whole, there is no way that parastatals could be said to be performing better than private enterprise. Think of how proper private investment in the energy sector would have saved us the massive power price hikes we’re suffering now. Or, simply watch e-tv and SABC3 and notice the difference, count the paid-for ads to see how they’re really doing in the market place. 

If the failures exist, and reform is necessary, how should it be accomplished?

You need to decide whether to keep the things private, or go public. And yes, don’t listen to Blade on this one; go private! Really private. You wanna know why people are jumping to Neotel, it’s because Telkom thinks like a parastatal. Think very carefully about Eskom, but bring in private money, commercial thinking; there’s money to be made in running power companies and train lines and providing services, let people come in and find a way. Hell, they’ll probably even pay you for the privilege. 

Can SOEs be reformed from within, or are they intrinsically inefficient?

They are owned by government. They ARE intrinsically inefficient. Really, they are. There may be the odd centre of excellence, but you’ll have to look hard for it. And this points to the real issue. If you try to reform them from within you will have huge battles all over the place within each one. They will make recent events at the SABC look like a picnic. And everyone will run off to Luthuli House crying that what happened to them is not fair. So don’t try it. You need to know that as long as government, and thus the ANC, has a hand in running these things, they will be inherently political. It’s about deployment (the very thing that is destroying this country), and that is your problem. But you can fix it by making them non-political.

Would changes in the operating environment improve SOE performance, or is a wholesale change of ownership necessary?

Changes in the operating environment could mean anything. We would suggest you take the politics out of the equation. Stop appointing the people who run them from Luthuli House. And yes, a change of ownership is necessary. But we’ll understand and possibly even recommend a gradual one, or even a part change in ownership. We know you don’t want to give up the power controlling these things gives you, but bite the bullet, put the country first and see how much the people love you when their lives improve dramatically, directly because of this one act.

Are SOE inefficiencies a by-product of government-required social objectives, and do the benefits from these social goals outweigh the cost of the inefficiencies?

You’ve got this question entirely backward.  The inefficiencies are there because they’re owned by government, and are thus politically controlled. Parastatals’ inefficiencies are not a by-product of social objectives. They’re a product of the fact that they are parastatals. You would achieve far more “government-required social objectives” by freeing them to deliver. It’s the old story, if “transformation” is a social objective, is it better to appoint more black women at Eskom, even if that means losing the institutional memory held by white men? Surely, while we accept the men were appointed by an illegitimate regime, it is better for everyone to keep the lights on first, and then to look at “transformation”. We realise that’s a little controversial, but think of what happens if you don’t get it right. Don’t muck around with objectives, tell each parastatal to do one thing properly (like keep the lights on, deliver clean water, produce good programming, manage our signal spectrum properly, pick up the rubbish) and leave it at that. You’ll have a much happier electorate. 

What is the role of SOEs in the developmental state?

Surely the answer here is that they are supposed to be an extension of government. If government’s role is to provide some basic services and set the playing field for everyone else, then that’s what they should do. They should provide those services. They should make sure the trains run, and run on time. They should check that freight locomotives haul freight, and save our roads. That will build the economy. They don’t need to do anything else.

If we could sum this all up, it would be like this. Mr President, what’s needed here is focus. Not big words – short objectives. Give them that, and leave them to it. Free them up. De-politicise them. Put the country first.

Will this happen? No. Does the ANC in its current form (with an apparent inability to agree on almost anything except that power is a good thing) have the will to grasp the nettle here? No. You don’t believe us? Then may we remind you of what happened to the Khampepe Commission? It may ring a bell. It recommended that the Scorpions be retained. DM

Grootes is an EWN reporter.


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