The Coega Steel dilemma: When governance rules collide with jobs

The premature collapse of manufacturing businesses, often following municipal failure to provide critical services or support, remains a tragic feature of our local economic landscape.

These failures underscore a systemic tension: the conflict between rigid administrative processes and the urgent strategic imperative of local economic development.

The recent reports surrounding the Coega Steel (Agni Steels) project and the alleged circumvention of municipal processes to lease a transformer present a complex case in point.

For context, in August last year, Coega Steel asked to lease a R25-million transformer from the Nelson Mandela Bay municipality after its smelter failed. The lease was reportedly approved in under 24 hours, without council oversight or the public participation normally required for such a large asset.

Executive Mayor Babalwa Lobishe brought the agreement to council for approval, but by then, payment had already been received and the process had bypassed normal oversight.

Read more: NMB’s lease of R25m transformer to Coega Steel heads for high court

Critics have raised concerns about informal documentation and the lack of committee review, prompting political and legal scrutiny. The acting city manager has now taken the agreement to the high court for judicial review.

Read more: ANC demands answers from their own mayor over Nelson Mandela Bay's R25m transformer scandal

From a policy perspective, investment promotion and retention frequently operate in ambiguous territory, especially when urgent interventions are required to prevent job losses and economic decline.

My initial reaction to the reports was not to equate the bypassing of processes with automatic guilt or corruption. Rather, it was to recognise that such situations can reveal one of two extremes: either a network of corruption and patronage, which must be unequivocally condemned and punished, or a case of decisive, pro-development intervention, which may warrant a different assessment.

Read more: ‘Jobs on the line’ — Coega Steels explains emergency lease of NMB metro transformer

This dichotomy forces a fundamental question about public administration: what is the ultimate purpose of organisational rules?

Processes exist to serve the strategic objectives of the institution — to ensure efficiency, accountability and fairness. When those very processes become impediments to the core strategic mission, especially in a crisis, a rigid adherence to them can constitute a failure of the institution itself.

This is particularly critical in a South African municipal context, where local government is constitutionally mandated to play a developmental role. The rules must enable developmental outcomes, not veto them.

Globally, there are compelling cases where cities have successfully navigated this tension. For instance, following the 2008 financial crisis, several European cities implemented accelerated, streamlined approval processes for strategic development projects to stimulate economic recovery, while instituting robust ex-post ratification and audit mechanisms to maintain accountability.

The key differentiator between justified intervention and malfeasance lies in the method of deviation.

Ethical and logical mechanisms for such exceptional actions exist. They are built on pillars of transparency (eg, immediate notification of council leadership, including the speaker, opposition chief whip and audit committee chair), procedural integrity (setting immediate deadlines for formal ratification and independent due diligence reports) and the absolute avoidance of personal gain.

The decision, even if urgent, should be made by convening the appropriate authorities wherever possible, not by individuals in isolation.

Therefore, we must resist the urge to scandalise this incident before all facts are established. Without full information, we risk condemning what might, in fact, be a necessary and heroic act to save jobs and uphold the developmental mandate of the municipality.

Conversely, and with equal vigour, if any evidence emerges that this action served private networks or elite interests, the strongest possible sanctions must be pursued.

The challenge for our municipalities is not to choose between rules and results, but to build governance systems where rules are resilient enough to facilitate, not frustrate, their core mission of development. The Coega Steel case will be a litmus test of this principle. DM

Dr Ongama Mtimka is the acting director of the Raymond Mhlaba Centre for Governance and Leadership and a senior lecturer in the Department of History and Political Studies at Nelson Mandela University. He writes in his personal capacity.