Editorial: Power and greed derail parastatals

It seems the chief executives of parastatals are becoming corporate rhinos: an endangered species. Of the 300 state-owned enterprises (SOEs), several – among them the SABC, SAA, Eskom and the Passenger Rail Agency of South Africa (Prasa) – are in a leadership crisis. We report today on the vicious boardroom war at the state nuclear body and the nasty exchanges, including assassination accusations, at Prasa.

Given the mess, there’s a justified but dangerous temptation to wish SOEs away and let private companies run energy, water, public transport and other essential services. The proponents of this theory are quick to cite Sasol and ArcelorMittal – a privatised SOE and a multinational that bought the old steel company Iscor – as examples of the success of privatisation. They are missing a point: what’s crucial, whether in state or private enterprises, is efficiency.

Market forces alone cannot be the solution for a country with all the baggage of poverty and inequality South Africa has. SOEs run competently, as they were in other powerful economies centuries ago and in China in the mid-1990s, can help to prop up a sluggish economy. Apartheid South Africa used such SOEs as a survival tool against sanctions. But it may also be considered that some apartheid relics (such as SAA) have outlived their usefulness.

When he was president, Thabo Mbeki tried to run parastatals like private entities, with only limited success – and a corporate-style philosophy didn’t stop the factional battles in the SOEs. The bitter public spat in 2001 between Jeff Radebe, then minister of public enterprises, and Transnet’s then managing director, Saki Macozoma, exposed the depth of what in boardroom parlance is called “agency conflict”.

The poor state of SOEs then attracted criticism from Mbeki’s nemesis in the alliance, the South African Communist Party, whose general secretary Blade Nzimande said in 2008 that the SOEs were not serving the developmental state, and that their boards exercised narrow financial mandates. He called for a total review, which was put into action by President Jacob Zuma in 2011. The presidential review committee, headed by Riah Phiyega (now police chief), focused mainly on the political mandate of these SOEs and spent less time on their efficiencies and necessary restructuring. Key among its recommendations was a greater ministerial power to appoint chief executive officers.

Three years later, the battles inside the SOEs have intensified, claiming the scalps of many executives and board members. At the heart of these skirmishes lie poor corporate governance, interference by directors, political meddling and multibillion-rand state contracts for cronies.

Ironically, the ANC outlined the solution for parastatals at the 2007 Polokwane conference that brought Zuma to power, which it saw as “strengthening the role of state-owned enterprises and ensuring that, whilst remaining financially viable … [they] respond to a clearly defined public mandate and act in terms of our overarching industrial policy and economic transformation objectives”. This aim, however, seems to have been forsaken in favour of power and lucrative contracts.

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