Interim CEOs are heading up most of South Africa’s state-run utilities
while party politicians fight it out over patronage opportunities and
the public policy choices that have divided Zuma’s cabinet.
A cartoon by leading South African cartoonist Zapiro late last year depicted South Africa’s Public Enterprises Minister Barbara Hogan looking somewhat distraught as she chased a flock of headless chickens. The chickens bore the names of state-owned enterprises such as power utility Eskom, transport and logistics group Transnet, South African Airways (SAA), the South African Broadcasting Corporation (SABC) and Armscor. All, one way or another, are leaderless and the largest of them have seen fierce and highly politicised boardroom battles. The confusion has raised important
questions not only about corporate governance but also about the role of the parastatals in the economy, their relationship to government and the ability of either national or corporate executives to define public policy. Added to the debate are important questions about equity, profitablity and deregulation. “The tension between the liberal ANC and the Communists is pushing the country into indecisiveness”, says Lumkile Mondi, chief economist at South Africa’s Industrial Development Corporation.
Transnet has been without a permanent chief executive since the departure of Maria Ramos late in 2008, with an acting CEO, Chris Wells, acting chairman Geoff Everingham and acting finance director, Anoj Singh. Transet has experienced a nasty and racially-charged battle over the CEO post, with Transnet executive Siyabonga Gama – who was suspended last year on allegations of corruption and fraud – claiming he was denied the CEO job on racial grounds. Gama had never been the board’s preferred candidate for the job but gained support from some high-ranking African National Congress officials and a couple of cabinet ministers who had nothing to do with transport. That raised questions about Hogan’s authority, as well as about how seriously the government and the ruling party took the independence of the board.
At Eskom too, a political battle with racial overtones ensued late last year after former CEO Jacob Maroga resigned over strategic differences with chairman Bobby Godsell. When the ANC Youth League came out in support of Maroga and President Jacob Zuma intervened, Godsell also resigned. So Eskom is now led by an
acting chairman, Mpho Makwana, who is also acting as CEO. Likewise, although SAA has a new chairman (Cheryl Carolus), it has had an interim CEO, Chris Smyth, for the past year after its former CEO resigned in response to allegations of mismanagement. The CEO of arms procurement agency Armscor was forced out. And the public broadcaster, the SABC, has been the site of one controversy after another with its board ousted and its CEO replaced by Solly Mokoetle late last year, following evidence of severe mismanagement.
There could hardly be a worse time to have headless parastatals, particularly in key industries such as electricity and transportation. Eskom’s woes over the last couple of years have illustrated just how wrong things can go and how costly it can be for the economy, especially when inadequate management combines with inadequate infrastructure. In the power crisis of January 2008, South Africa’s mining industry was shut down for five days and the entire country experienced rolling blackouts for more than three months. Eskom’s capacity to supply power had fallen to a dangerously low level because no new power stations had been built for many years while demand had soared. Poor management decisions at Eskom precipitated the crisis: amost all of South Africa’s electricity is generated from coal, but stocks had run down and the aging power stations were poorly maintained.
The government recognised some years ago that the ailing state of South Africa’s economic infrastructure was a major constraint on growth. It embarked on a drive to increase the economy’s competitiveness with an infrastructure programme that has increased fixed investment by public corporations to more than 5% of GDP, a level not seen since the late 1970s. Eskom, Transnet and the National Roads Agency are due to spend a total of about R441bn ($59.3bn) to upgrade and expand power, rail, road, port and pipeline infrastructure over the next three years. That is more than half of the R872bn of investment in social and economic infrastructure included in the public sector’s plans. The programme provides a fiscal stimulus that is helping to keep the national economy afloat in the short to medium term. It is also crucial to improving the economy’s sustainable growth potential in the long term. Read the full article in
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