Defend Truth


In defence of Bombela

Ivo Vegter is a columnist and the author of Extreme Environment, a book on environmental exaggeration and how it harms emerging economies. He writes on this and many other matters, from the perspective of individual liberty and free markets.

The Gautrain operators have taken a great deal of flak over the lavish funding they received and the extraordinary revenue guarantees they enjoy. But would you be a good profit-seeking capitalist if you didn't take free money from corrupt socialists, when it is lawfully on offer?

It is easy to get emotional and angry at private profiteers who benefit from the government’s budget largesse. When taxpayer coffers get plundered, everyone wants to know who got filthy rich as a result.

Take the Bombela Consortium, the concessionaire which is on such a sweet wicket with the Gauteng Provincial Government. When Mbazima Shilowa first mooted the Gautrain as a glorious vanity project for Gauteng, companies in the construction, engineering and mass transport business must have been drooling at the prospect.

The same goes for GijimaAST, the company that was founded on the contract that should have given us all smart-card IDs a decade or so ago. We’re still shlepping oft-washed but filthy green ID books around, while the lucky tender winners have become fat on their unearned billions. Nice job, if you can get it.

Our airports – well, some of them – are pretty good by world standards. But would you accept “good enough” over “world-class” if this allowed you to save some money in airport fees or airline ticket prices? Only an exclusive monopoly can ignore annoying customers who think they have a right to go somewhere else if they don’t like your product or prices.

Or take the owners of the infamous office block that the police rented for a cool R500 million. While ordinary construction firms have to erect entire office buildings from scratch for less, one lucky owner was going to get the chance to earn a fortune from a building that is very ordinary indeed. Where’s the harm in accepting such a lease?

A transaction occurs, by definition, at a price freely negotiated between two parties. If someone offers you a car you think is worth R500 000 for R300 000, are you wrong to say, “deal”?

If someone offers you a free drink, and you have no conflict of interest issues to worry about, would you be wrong to accept it?

Of course not. If, however, the seller has a duty to the true owner to obtain a fair price, the seller has something to answer for.

That is equally true if the offering party is the government. When it awards a contract, and a company tendering for the business is able to negotiate favourable terms – such as an inflated price, revenue guarantees that the private sector can only dream about, and a whole lot of other sweeteners – why shouldn’t the company take advantage? It would not only have the right to do so, but because the company’s managers have a duty towards shareholders to maximise revenue and minimise risks, one could argue that the company has a moral obligation to try to land such contracts.

The government, by contrast, is failing miserably in its own duty towards its “shareholders”, the taxpaying public.

Lest we dismiss the description “taxpayer” as a euphemism for rich people and big companies, it is worth remembering that there are many taxes that apply, directly or indirectly, to even the poorest among us. VAT is an obvious example, as is fuel tax. But even property rates and taxes, for example, are factored into rents, so poor tenants are hit no less hard than apparently wealthy owners.

The taxpaying public has a right to expect their government to minimise its own risk, and maximise the benefit it expects to gain on behalf of the public. When it offers contracts on terms in which the contractor cannot possibly lose, as was the case with Bombela and the Gautrain, it is the government that has failed in its duty. Calling it a “public-private partnership” is just rhetorical sleight of hand, designed to fool voters into thinking that market discipline might enforce efficiency, or someone other than the taxpayer assumes the commercial risks.

Our anger should be directed at the politicians and bureaucrats that dreamt up the public-risk, private-enrichment scheme.

That the government is, in almost all sectors of the economy, the single largest spender, is a travesty. It means that a very large part of citizens’ income is spent on projects that they, had it been up to them, would not have funded. In other words, it removes from citizens’ control money that they earned, and which they would otherwise have been able to spend on things they really do value.

Would that government determined to scale down its grand ambitions, forgo vanity projects, and focus on the basics, with the intent to do them well. Would that government was less likely to waste taxpayer money by being beaten in negotiations by the private sector – to describe what happened with a deal like the Gautrain in the kindest possible way.

However, given that government appears to be an endless fountain of profitable and risk-free contracts, it is not a surprise that private companies leap to take advantage. And these companies are not, in principle, doing anything wrong.

So, in defence of Bombela, if I were them, I’d have waded just as deeply into the filthy business of looting the taxpayer. It would have been my duty to shareholders. Any blame rests entirely with the fools in government who agreed to my terms.

Well done, Bombela. Enjoy the gravy train. DM


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