/ 3 July 2014

Brown: Parastatals, clean up your act or we’ll do it for you

Brown: Parastatals, Clean Up Your Act Or We'll Do It For You

Five months – that’s how long Minister of Public Enterprises Lynne Brown is giving state-owned enterprises to right their ships before she begins a clean-up.

Although she will not interfere in their operational management, she is planning a major shake-up to make them more efficient and instil a culture of good governance.

Most of the parastatals that fall under Brown’s department have been plagued by internal fighting, alleged political interference and financial mismanagement.

There are also concerns within the ANC and the government that some parastatals’ board members are in the pockets of a politically connected family business that dictates who receives multimillion-rand tenders and key government positions.

In an interview with the Mail & Guardian this week, Brown made it clear she wanted to clean up the mess and the only way for her to do this was to make changes at board level.

“All I need is five months to assess the level of skills within various boards. State-owned companies are multimillion-[rand] entities. They must adhere to the PFMA [Public Finance Management Act].”

Good governance
Unlike her predecessor Malusi Gigaba, now minister of home affairs, Brown said she would not interfere in the administrative affairs of the parastatals. “I don’t run the companies. I have an oversight duty on them. I want [them] to adhere to the principle of good governance.”

During his tenure, Gigaba was accused of interfering with the procurement processes of a number of parastatals. He is also allegedly close to the Gupta family, which benefited financially from the entities falling under his department.

Gigaba was one of the few ministers who attended the controversial Gupta wedding, which was snubbed by many ANC leaders, including President Jacob Zuma.

“All the state-owned enterprises come up for AGMs [annual general meetings] now,” Brown said on Wednesday. “What I have done with Transnet is reappoint all board members for five more months because I have only been in [office]for a month. I have got to apply my mind to look at the mix and what is lacking in the board.”

But some of the companies she has inherited are in such bad shape that they will require action far sooner.

South African Airways
SAA is possibly the worst of the lot, with a board split from its chairperson Dudu Myeni, a divisive figure who is believed to be close to Zuma and was appointed by Gigaba.

“Clearly that board cannot work together,” said Brown, who declined to discuss individuals.

But she was clear that the relationship between Myeni and the rest of the board was toxic. “The levels of infighting are so extreme I have to act on the board and that may be one of the boards where I don’t give them five months.”

The leadership of the national carrier has been so beset by factionalism that Brown called a no-holds-barred meeting on Thursday last week, allowing board members to air their grievances.

Although she told Business Day that “heads would have to roll” before the board meeting, it appears she has decided to take more time to get to grips with the situation.

Before Brown became public enterprises minister, she believed, like much of the public, that most state-owned companies were in dire trouble. She came in with a fix-it attitude, vowing to fill Eskom’s vacant chief executive position as soon as possible, to put together a business plan to improve the efficiency of SAA and SAA Express, and to crack the whip in cases where individuals are not performing.

But many of the situations are complex and she will bide her time for five months before getting out that promised broom.

Surprising promotion
Her move to public enterprises on May 26 was one of the more surprising appointments in Zuma’s second-term Cabinet. A former premier of the Western Cape, from July 2008 to May 2009, she was elevated from leader of the ANC’s weak caucus in the Western Cape – the only province where it is in opposition – to a high-profile ministerial role.

Gigaba’s demotion to home affairs came as a shock for those watching the ambitious leader.

There are two theories, according to sources. One, which is held by those sympathetic to Gigaba, is that he was a threat to more senior members in the ANC, who wanted to deprive him of a high-profile position.

The second is that Gigaba’s alleged closeness to the Guptas was a problem. They allege he was responsible for appointments and contracts made by the parastatals to favour the family and their connections.

Brown would not be drawn on speaking about her predecessor. After a punishing day of meetings this week, and with more still to come, she seems entirely focused on catching up on her new portfolio.

Not all bad
Five weeks into the job, she has fast become acquainted with the nuances of the situation, rattling off figures and plans for each of the state-owned companies she is suddenly responsible for overseeing on behalf of the taxpayer.

She did say that it’s not all bad.

“I think it varies. There are some parastatals, like Transnet, that have shown incredible strengths.”

But she doesn’t mince her words when it comes to the ailing entities. Eskom is her second-biggest headache, and she is none too pleased about its attempts to appoint a permanent chief executive.

Collin Matjila has been acting in the role since April 1, after the previous chief executive left on March 31. But Matjila is a controversial figure, thanks to his previous role in Cosatu’s investment arm, Kopano ke Matla. Trade union federation officials want answers about his role in rows over a pension fund and the sale of the federation’s headquarters for less than its value.

The M&G reported last week that he has been instrumental in inexplicably delaying a multibillion-rand tender to replace ageing steam generators at the Koeberg nuclear power station for three years, sparking suspicion that he and others aligned to him want a particular bid to succeed.

But the three names Eskom has sent to the minister to replace Matjila left her less than impressed.

“I am dissatisfied with the amount of information they have given me on the candidates. I have sent it back and asked for motivation on why they are choosing the three candidates they are sending to me.”

Seeking integrity
She’s hoping to make an appointment in the next month or two and is clear about the kind of candidate she is after. “We need a person who understands the energy field, a person who is technically competent and a person who has very strong managerial skills”, she says, before adding one final criteria: integrity. “It must be a person who the public can look up to and whom the private sector can trust.”

But she gives Eskom kudos for keeping the lights on despite undercapitalisation, credit downgrades and other issues affecting the company’s running. “I think Eskom itself is doing very well. We don’t have blackouts for days and days. We have controlled load shedding.”

She points out, too, that millions more South Africans have gained access to electricity over a short time, putting pressure on the grid.

Ultimately, as with SAA, she believes the primary problem is one of a faulty business case. And the political interference that has traditionally bedevilled state-owned companies doesn’t help either.

“I think there should be no political interference. I don’t run the company; I have oversight over the company.”

This model of “shareholdership” is in stark contrast to her predecessor and a return to the style of Barbara Hogan, who was the public enterprises minister before him.

Hogan favoured a hands-off approach, allowing parastatals the independence to run themselves, a model poo-poohed by Gigaba, who prided himself on his role as an “active shareholder”, often arguing that the developmental state model required his intervention.

Back to basics
But Brown is going back to basics. “And I have always prided myself with being somebody who would like to adhere to the principles of good governance and I don’t see myself acting outside of those principles.

“Our laws are very good. The Public Finance Management Act is very clear on what my role is – and the role of others. And that’s what I will judge the boards against.”