/ 14 June 2010

More headaches for Hogan

More Headaches For Hogan
Barbara Hogan 2008 – 2009

A series of turf wars is being played out around the country’s state-owned entities, giving Public Enterprises Minister Barbara Hogan a full in-tray.

Key challenges include finding a new chief executive for Eskom, plugging its multibillion-rand funding hole, bringing in private investors to help meet the financing requirements of public entities, while fending off union opposition to perceived privatisation, and resisting what one unionist termed the culture of patronage inside parastatals that has developed since Polokwane.

Hogan has twice found herself arguing the case for good governance and due process at parastatals, which has instead seen supporters of those charged with corruption or mismanagement accusing her of being antitransformation.

The two cases are the high-profile situations of Eskom’s Jacob Maroga and Transnet’s Siyabonga Gama. Maroga was in court this week, claiming damages of R85-million for unfair dismissal from Eskom.

Speculation in the media has suggested the likely appointment of long-time Eskom employee Brian Dames, currently the head of generation at Eskom, as the new chief executive.

Dames is understood to have the support of the department of public enterprises, but will be a controversial appointment because senior Eskom officials have reservations about his ability to lead the company.

The National Union of Mineworkers said this week that it would not be opposed to Dames’s nomination to Eskom’s top job, Business Day reported. Dames has long held leadership positions within Eskom, including when the controversial decision was taken to award boiler contracts to Hitachi Power Africa for the Medupi and Kusile power stations.

The ANC’s investment arm, Chancellor House, has an interest in Hitachi Africa. Dames is also Eskom’s leading champion of Kusile, the giant power station that Eskom is committed to building — even though it is yet to work out how it will finance it and senior government sources are concerned about what they see as its spiralling costs.

While questions remain about this type of leadership legacy, insiders believe Hogan’s department backs Dames. Meanwhile, earlier this week it was announced that the suspended head of Transnet Freight Rail, Siyabonga Gama, was found guilty in a disciplinary hearing of tender irregularities. He stood accused of awarding a lucrative contract to a company connected with Communications Minister Siphiwe Nyanda.

Gama was touted as a possible chief executive for the company, but the case against him became a focal point for critics of Hogan, who accused her of an anti-transformation agenda within the parastatals that she oversees. Her defence of the Eskom board’s decision to let Maroga go was similarly criticised.

Two separate reviews on state-owned entities — one under the auspices of the public enterprises department and the treasury, first mooted late last year, as well as one by the presidency that was announced in February — are still under way.

The two reviews are meant to inform a synthesised report for submission to Cabinet, the department told Parliament in March. No word has been given on when the public can expect an outcome. The department said, however, that the interministerial committee review is on hold until the presidency completes its separate investigation. The presidency did not respond to questions about the review.

Hogan’s efforts to improve the performance of troublesome parastatals have not been welcomed by organised labour, which believes she is far too aligned to plans to privatise many of these institutions. Unions have previously been supportive of Hogan’s insistence on clean management, but now they are joining in the criticism.

This week the National Union of Metalworkers of South Africa (Numsa) came down heavily on the public enterprises department for allowing perceived moves to privatise portions of Transnet. It alleged that the state-owned entity was planning to sell off key assets, such as the port at the Coega industrial development zone, and the coal lines from Witbank to Saldanha and Richards Bay.

Numsa insiders said the trade union does not support Hogan when she insists on ‘corporatising” the stateowned entities (SOEs). ‘They want to have SOEs that run like corporates; we feel it has to be a developmental entity that will remain a strategic asset for everyone to share in, not just an elite few,” an insider said.

The trade union also refuses to support Gama, because his appointment to the Transnet top job would be a victory for the ‘post-Polokwane patronage network”.

‘He gave tenders to Nyanda’s companies and therefore Nyanda is supporting him now, while there are other people who are more capable of doing the job,” a Numsa insider said.

In response to questions from the M&G the public enterprises department said that Numsa’s concerns had been noted and that the minister and deputy minister would be engaging the union directly. Numsa’s criticism comes after Transnet announced that it was making concessions to portions of its rail network available to the private sector.

But Transnet has made no effort to hide a renewed emphasis on private sector participation. In its corporate strategy plan the company noted that it would develop a detailed private sector participation framework and strategy to develop ‘robust business cases for potential projects”, obtain the necessary approvals from the government and establish ‘transparent processes” to interact with the private sector.

Eskom, too, due to insufficient funds, has opted to invite private investors to take a stake in the new Kusile coal-fired power station. Private sector experts have, however, long called for the rationalisation of these entities, which have drained public coff ers through inefficiency and mismanagement.

A government source argued that not enough emphasis is being placed on the fact that private sector participation is not privatisation. Instead, it is a way for cash-strapped public-owned companies to raise the funds needed for further expansion and capital investment.

‘Perhaps the government has not communicated this enough,” an official said. Sources in Transnet confirmed this, saying that many of its private sector participation plans were intended to further projects that it would not necessarily have the money to pull off alone.