Twelve years on, the commanding heights of the economy are finally being tackled in the service of the ordinary man and woman.
In electricity, the regulator has found Eskom negligence behind the power cuts that caused widespread disruption in the Western Cape; that its highly paid executives were essentially asleep at the switch.
- In fuels, the multinationals and synthetic fuel companies are subject to an inquiry into the myriad fiscal measures that pump up their profitability.
- In banking, a commission of inquiry will study the costly payments system we all use daily, yet which just four private banks own and control.
- The long-term and life assurance industries are about to unveil much needed changes to benefit the pensions of ordinary working people.
- In telecommunications, the government is setting up a new entity, which in part appears to be an attempt to tackle Telkom’s monopoly.
- The focus on poor business practice is long overdue — and it is helping to rouse consumers from their slumber.
- In banking, consumers are increasingly aware of price;
- pension fund members, bolstered by the work of the Pension Funds Adjudicator, are demanding better service for high fees and an end to punitive premium reductions; and
- many hundreds of thousands of South Africans have cancelled their Telkom lines in favour of more convenient, and often cheaper, cellphones. This week, we report that the government itself is aiming to become a competitor to Telkom.
All the concerns now under scrutiny are huge enterprises, some private, but also either fully or partly state-owned.
Under apartheid, business, and particularly big business, was essentially given carte blanche to do as it wished, as long as it retained its investment. As others disinvested, those left behind used the space to consolidate their hold.
When apartheid died, the cry was for foreign investment. But many foreign companies that explored the prospects here shied away from invincibly entrenched domestic competition. Where foreign investors put in money, notably in the case of Iscor (now Mittal), it often resulted in local manufacturers being force-fed uncompetitive prices, much to the government’s dismay.
Part of the price of cosseting the venerated and venerable has been a licence to do as they please. Eskom runs the gauntlet of a minuscule fine for visiting its inefficiencies on Cape Town and other cities. New legislation would raise the penalty to R3,6-billion, a cost that consumers would ultimately have to foot. But at least negligence is now matched by appropriate sanctions.
Sasol, which has benefited from years of government largesse, now pleads that the regulators should first be allowed to do their jobs before windfall taxes are applied. The question that it has not answered is why, 12 years into democracy, we still regulate fuel as if we had the enclave economy of an isolated state.
In some cases, the reform has been slow because it has not been generally realised that apartheid nurtured a big-brother-knows-best culture favouring the large over the small, bureaucracy over freedom of choice and centralised rather than decentralised management. Head office knew best, and inefficiency ruled.
So, for instance, transformation at Transnet focused on putting black people in charge, rather than also driving efficiencies and improving the services needed in a country with new priorities.
The upshot was more of the same, including stunning losses in the foreign exchange market, until Maria Ramos was sent in with a brief to transform this apartheid behemoth into a modern institution capable of delivering competitively priced transport services.
Key sectors that had built up cosy cartelised positions were quick to cut deals with the new politically connected elite, thinking that this was all that modern business practice meant.
The Competition Tribunal has set things straight: Sasol and Engen were told that empowerment and efficiency are parallel, not sequential processes. The effect of current policy, the tribunal noted, was that consumers, rather than shareholders, were being asked to pay transformation costs.
Sasol is deeply concerned about the government’s proposal of a windfall tax on its super-profits, arguing that there are sufficient new regulations in place to protect the consumer. Commuters and motorists can be excused for not noticing the difference. Sasol has argued to the windfall tax commission that if a company is making super-profits (on Sasol’s evidence it is not) this is a good thing, because other companies will move in and competition will drive down prices and returns.
This is how it works in theory. But a unique combination of factors in South Africa, including our relative geographical isolation, the small domestic market, skills shortages, transport inefficiencies, high banking charges, an uncompetitive fuel sector, stratospheric telecommunication costs, inefficient management, as in the Eskom case, and weak or non-existent regulation in many sectors, conspire to keep competitors away.
This new focus on the commanding heights of the economy is not quite what the Freedom Charter had in mind. But it should be welcomed by South Africans, for whom it can only mean better prices and a more inclusive and competitive economy.