Experts: State-owned enterprises doomed to fail

Although telecommunications provider Telkom ended months of rudderless leadership with the announcement of Sipho Maseko as chief executive officer and Brian Armstrong as chief operating officer on Tuesday, several other key institutions are imploding.

The South African Broadcasting Corporation (SABC) is involved in a bitter political showdown after its chairperson Ben Ngubane and his deputy Thami ka Plaatjie, both ANC members, resigned after the board held a special meeting two weeks ago to remove controversial acting chief operating officer Hlaudi Motsoeneng from his post.

Their resignations resulted in a mass exodus of the SABC board with seven more members of the board resigning.

An interim board of five was hastily formed and Motsoeneng, who has been referred to as President Jacob Zuma's enforcer at the public broadcaster, remains in his position.

South African Airways (SAA) management has been wracked by instability since September 2012, when the majority of the board, led by former chair Cheryl Carolus, resigned over a breakdown in its relationship with Public Enterprises Minister Malusi Gigaba.

It was reported that a huge SAA tender, worth at least R10-billion, could be at the heart of the destructive battle to control the airline's board and executive.

At the same time there were predictions that Eskom's chief executive officer Brian Dames would not remain in his position until June as he was in the firing line after the construction of the Limpopo-based Medupi power station ran behind schedule and over cost and electricity tariffs spiralled out of control.

It remains unclear as to who will replace Dames in a time when Eskom is still battling to provide uninterrupted power to the entire country.

Transnet could be the sole parastatal that maintained a certain level of respectability, even though its ambitious strategy to ramp up locomotive capacity has been running months behind schedule due to a stakeholder spat over which bid criteria to accept.

All of this has resulted in an increasingly uneasy environment where institutions that are state owned – partly or otherwise – are failing to deliver on their mandate and are unable to maintain profitability, relying on state funding to stay afloat.

'Living in reality'
“It’s as if government is not living in reality when it comes to parastatals and companies they have a stake in,” Chris Hart, economist and business strategist at Investment Solutions said.

“Understandably these businesses are not supposed to operate like commercial entites and must service the public interest, but they have to work along business principles.”

Hart said many state-owned companies had an inherent advantages in their respective markets that they did not use for the benefit of South African citizens.

“Eskom has a monopoly on the electricity sector and they haven’t used it to make electricity more affordable, they’ve just used it dictate prices,” he added.

“The same goes for Telkom. They have some of the best infrastructure but no real competition and it shows in their final product and service.”

Hart also said it was almost impossible to attract the necessary skills to state-owned companies.

“It’s like drinking from a poisoned chalice. You can have all the skills and expertise in the world, but in an environment where your main stakeholder does not know what it wants to do, you won’t succeed.”

'Mass confusion'
Kate Skinner of the SOS Support Public Broadcasting Coalition echoed Hart's sentiment.

“There is mass confusion about what the SABC needs to do and what its mandate is,” Skinner said.

“If you had less external interference the situation would be far more stable and the SABC would actually be able to get on with what it needs to do.”

But political interference is not the sole problem experienced at state enterprises, according to the Democratic Alliance's spokesperson for public enterprises, Natasha Michael.

“There is an endemic problem of secrecy in these organisations and that’s why these issues blow up the way they do,” she said.

“There is a fear that if anyone speaks up they will lose their job, or worse still, disappoint government.”

Who they know, not what they know
Michaels added that if public enterprises wanted to succeed, inappropriate appointments needed to cease immediately.

“Very often people are appointed to positions not based on what they know, but who they know,” she said.

“This has resulted inexperienced and incorrect individuals taking the reins of key government owned companies, very often with disastrous results.”

In order for state-owned entities to flourish, Hart said government should not interfere in these companies, which are commercial bodies.

“All of these businesses have the possibility to become great enterprises, but they are lagging behind and will dwindle if their mandates are not made clear and political interference is not quashed,” Hart added.

In a previous version of the story, we said Transnet was running behind due to a boardroom spat regarding the bid. In fact, it is a stakeholders' spat regarding the bid criteria.

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