Reality check: Pravin Gordhan has revealed plans to get state-owned
entities into better order. Photo: Halden Krog/Bloomberg/Getty Images
The business rescue of SAA took too long, cost a lot of money and those in charge did not always make the right decisions. This is according to Public Enterprises Minister Pravin Gordhan, who sat down with the Mail & Guardian this week to talk about SAA, the future of the country’s ailing state-owned entities (SOEs), speculation they may be moved from his portfolio and accusations of political interference.
“We have learned a lot from the business rescue process. And we have learned a lot about business rescue practitioners,” Gordhan said.
SAA is the first SOE to be placed under business rescue, which started in December 2019. The process took almost 18 months and cost taxpayers about R250-million. The business rescue practitioners, Les Matuson and Siviwe Dongwana, were paid R78-million, according to department figures.
SAA exited business rescue at the end of April.
The rescue mission
Business rescue processes are guided by the Companies Act. But the legislation, while suited to commercial enterprises, does not necessarily work for SOEs, Gordhan said.
New legislation is in the works to better accommodate the SOE shareholder model.
The Act does not control the number of consultants that may be brought into the business rescue process, Gordhan noted. “So I think the lawyers make a lot more money out of the business rescue than the business rescue guys. When we look at the final numbers, it’s atrocious.”
But looking back on the process, as painful as it was, business rescue was still a better option than liquidation, Gordhan said.
“Because one of the key points is that the workers would have been far worse off. Today people who have accepted the voluntary severance packages, or who will accept the section 189 retrenchment process, will at least walk away with some money,” he said.
SAA’s new airline has been left with 1 000 workers, down from 4 700. Almost 400 pilots did not take voluntary severance packages and may lose their jobs.
There is still a lot to be done to get SAA up and running again, Gordhan explained. Even then, the course of the pandemic has left a lot up in the air. “We’re moving through a huge period of uncertainty, as far as aviation is concerned. But within that context, between July and August, we should get going.”
Repair work
On Tuesday, Gordhan gave his budget vote speech, outlining the department’s current and future efforts to bring the country’s SOEs into line: the new SAA will soon get a strategic equity partner, Eskom will be unbundled, Transnet will get a boost from the private sector and Denel’s five divisions will be whittled down.
These plans have seen Gordhan charged by some with embarking on a project of privatisation, which the minister has repeatedly rebuffed. Others have criticised him for not using the private sector enough.
“The reality is that the state doesn’t command access to all of the resources that are required to invest in infrastructure, whether it is the ports or the railway lines or renewable energy.
“So the state has got to become imaginative in terms of how it enters into partnerships with the private sector. And, in the past, the failures in those partnerships is that the private sector has dumped all of the risk onto the state.”
Infrastructure investment will be key to getting the country’s SOEs working again — and to dragging the economy out of its slump, Gordhan said. Earlier, during his budget speech, the minister was at pains to explain how corruption has stolen money from infrastructure investment and delayed plans for better working SOEs.
“The crucial thing is understanding what has happened, the damage it has caused and the repair work that needs to be conducted … Both SOEs and the department are dealing with yesterday’s issues, dealing with today’s stabilisation efforts and, in many cases, tomorrow’s issues,” he told the M&G.
The department has to be realistic about the time it will take to see integrity restored to the country’s SOEs, Gordhan said in his speech.
“We fully appreciate that these demand radical changes, which will be arduous and will take time. There are indeed no quick fixes.”
Politics
But some are not convinced the department has what it takes to oversee these changes. Responding to Gordhan’s speech on Tuesday, Democratic Alliance MP Ghaleb Cachalia said the department has presented “a Powerpoint overload of plans, promises and platitudes — none of which appear to understand that we are on the brink of economic and financial ruin”.
Narend Singh, of the Inkatha Freedom Party, said if the department is allowed to continue it will “break the back of the South African economy”.
Singh argued that SOEs be moved from Gordhan’s portfolio and to their relevant policy departments. In this scenario, SAA would be moved to the department of transport and Eskom to the department of mineral resources and energy. This sentiment has recently underpinned talk of a looming cabinet reshuffle.
Gordhan would not be drawn for comment on the rationale behind moving SOEs out of his department.
“I think that was more politics than anything else, so let’s just leave it at that. We have a job to do. And when the president decides to do otherwise, then we’ll see … So far I think we have done decent work. Of course there is a lot more to do in every respect, as we have pointed out. But we will keep at it until we are told otherwise.”
He later added, however, that interrogating the state’s role in the economy is an important intellectual exercise. “I think we need to look ahead and see what other options we have so these SOEs don’t again become the targets of pilferage.”
The minister also addressed accusations that he has become too involved in operations of the SOEs in his portfolio.
In 2018, Gordhan intervened in a standoff between Eskom management and labour over a proposed wage freeze. The wage freeze was subsequently taken off the table. Some have also speculated that his involvement at Eskom caused Phakamani Hadebe to resign as the power utility’s chief executive a year later.
“My job is not to negotiate. I have enough other headaches to sort out. My job for the last three years has been to learn about each of these businesses and go deeper and deeper so that I understand what I’m talking about. And there is still a lot to learn,” Gordhan said.
Gordhan said he is at times locked in multi-hour briefing sessions with entities. “So that they can give me the opportunity to ask questions and so that I understand what they’re up to. But they also understand that that is part of the oversight process. I don’t give them instructions,” he said.
“But that engagement is important and they appreciate it, by the way. It helps them to raise their game. And if there’s a crisis, like loadshedding, I will step in, make some phone calls and find out what’s going on.”
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