Oblivious to the extraordinary irony, Nazir Alli will nevertheless argue in the Cape High Court next week that financial details of the proposed Cape Winelands tolling concession to the Protea Parkways Consortium - of which Basil Read Construction is the leading member - must be kept confidential.
He will do so without Ms Tembakazi Mnyaka backing him up as Chair of the Sanral board. She resigned yesterday “with immediate effect” citing “personal reasons”.
Was that because the ‘rogue agency’ was taking its toll on her too?
State owned enterprises, like Sanral, are structured to separate policy-making functions from operational implementation. This is to ensure a prudent arms-length between the government of the day and the implementing institution so as to protect the them from the vagaries of party political quarrels and narrow political agendas, and free the institution to harness the efficiencies of the Private sector to get the job done quicker, sooner and more affordably.
It makes sense to free technical professionals from lumbering bureaucracies so they can get on with the job. However, that applies only if there is professional oversight to ensure best practice and so long as a competent and experienced governing board of directors is in place. They must watch over the entity, not only to ensure adherence with State policy, but also to ensure consistency with stated organisational values and (especially) prudent risk management. The board of directors have solemn fiduciary duties to discharge, prescribed by the Companies Act, to protect the interests of the shareholder - the State.
That’s the theory.
Ordinarily, if a leading board member of a well-functioning, transparent and accountable SOE resigns citing “personal reasons”, the media would have no business prying. However, if in practice the SOE is mired in controversy (as Sanral is) with suspicions about “political interference by factional interests”, “bias toward commercial interests of particular private business entities”, “failure to consult with legitimate stakeholders” and “failure to disclose information that the public has the right to know”, the institutional structure that was designed to filter out inefficiencies and corrupting tendencies becomes a pump to amplify them instead.
The cure becomes considerably worse than the disease. Thus if the chair of the board resigns citing “personal reasons” in the midst of such controversy her departure is an open invitation to the news hounds who want factual information. If Ms Mnyaka does not at least explain what her personal view is with respect to the numerous and accumulating blunders that she has had to preside over during her tenure as Chair of the Sanral board, the rumour mill will grind away with speculation, conjecture and intrigue.
Now is not the time for silence, secrecy and evasion, especially on the eve of Nazir Alli’s latest own goal - opposing the City of Cape Town’s application to have a confidentiality bar on certain documents provided to their legal team lifted in the public interest.
Some brief background helps us understand why this latest blunder is so injurious to Sanral, and outrageous to the tax-paying public at large.
A Public Private Partnership proposal was made some years ago by the Protea Parkways Consortium (PPC) to Sanral for the award of a 30 year tolling concession in return for a BOT (build, operate, transfer) contract to upgrade and maintain the Western Cape sections of N1 and N2 routes that converge in Cape Town. Led by Basil Read Construction, the PPC made its bid in terms of Sanral’s policy on unsolicited proposals, which constrains Sanral to only forge Public Private Partnerships that “stimulate a competitive environment, ensure transparency, and offer the public protection from the possibility of monopolistic practices and exploitation”.
Sanral is explicitly obliged by the policy to ensure proposals “should reflect a conformance with governmental aims, be in the public interest, avoid the creation of monopolistic practices, not seek to place onerous conditions upon government, …and reflect environmental, social and economic sustainability.”
Once a proposal is accepted, Sanral must respect healthy competition and allow free market forces to operate by inviting other contractors to also tender for the scheme. The original bid consortium has no automatic right to be awarded the tender. If its bid is not ultimately accepted, Sanral will, however, fairly compensate it for any useful work done. In the process Sanral becomes privy to commercially sensitive information from the bid companies. It undertakes to protect any trade secrets and intellectual property that bid companies have spent good money to develop.
Again, in theory it all seems fair enough. In practice, if evidence emerges that any construction companies that are supposed to be competing with each other have instead secretly colluded to share out tenders, Sanral must as a SOE, come down on the side of the State. The invisible hand of the free market must be invisible if Adam Smith’s famous doctrine is to be valid. Any attempt to ‘glove and handcuff’ the hand is bad. Very bad.
In South Africa it has become so bad that tender collusion and price fixing by large construction companies has become endemic.
Fortunately the Competitions Tribunal has now intervened. Basil Read Construction and several other construction companies have now pleaded guilty to tender collusion and price fixing. Certificates have been issued to Sanral and other government entities by the Tribunal so that the overcharging can be recovered from the cartels.
OUTA has repeatedly asked, through the Office of the Public Protector, via the media and directly to Sanral, what progress has been made to remedy the collusion by the cartels. On 11th June we wrote to Ms Mnyaka (see OUTA website for letter) asking for some clear indication on how things were progressing and listing our concerns. A month later we received a one liner: “You will receive further correspondence in this regard in the near future”. Now she has resigned. When will her successor be appointed? When will OUTA’s concerns be addressed?
Balancing the commercial interests of the Private Sector with the Public interest of citizens as a whole was always going to be tricky. Had Nazir Alli’s track record over the past decade shown a bias to the interests of the State, affirmed by his Board of Directors, I would trust him enough to accept the confidentiality agreement was important enough to uphold, for the greater good of all. If that was so, I very much doubt whether Ms Mnyaka would resign. She has, and, more worrying, she is not the first board member to have done so. Other former board members and professional staff employed by Sanral have confided their concerns about the governance integrity of Sanral with me in support of my representations to the Office of the Public Protector alleging dishonesty by the Sanral CEO and maladministration by the Board of Directors in failing to exercise prudent risk management and oversight.
But here’s the real rub. The Public doesn’t need a protector to work it out.
Whatever it says about the construction industry, the admission of tender collusion speaks of a massive failure by Sanral to protect the public from monopolistic practices and exploitation. Yet Mr Alli seems oblivious to the irony that he is turning out in defence of the commercial interests of the private sector, notwithstanding their shameful collusive conduct. Under the particular circumstances that currently prevail in the construction industry, surely the commercial interests of the private sector cannot be allowed to trump the public’s right to know the details of why the Protea Park Consortium is the preferred bidder for the Cape Winelands Tolling Concession and what risks the public may face if it goes ahead and turns out to be financially unsound.
My sources tell me that scenario is apparently likely because the toll tariffs needed to make it commercially viable within the projected parameters of traffic volume projections are likely to be too high for the Western Cape economy to sustain. From lessons learned from the Gauteng E-tolling debacle the Western Cape public is already in revolt. If the Protea Park Consortium can’t collect its revenue from tolls, Basil Read Construction and its consortium partners will then expect Treasury to make up the deficit.
In the absence of the factual information contained in the secret documents I don’t know for sure if my assumptions are valid, and thus cannot say with absolute confidence just how likely this scenario is. If the court rules to enforce the confidentiality agreement, the only way we can know is to wait and see if it actually does happen. I hope and pray it doesn’t. The South African treasury cannot afford any more wasted billions to indulge private greed at the expense of public need.
The billion rand question is why has Minister Peters graciously accepted the resignation of Ms Mnyaka rather than instructing her to fire her CEO? DM