Eskom, state-owned enterprises, law and order — Ramaphosa's uphill battle
With just hours before President Cyril Ramaphosa begins his second State of the Nation address, senior Mail & Guardian journalists unpack the challenges facing the president.
LAW AND ORDER
Between last year’s State of the Nation address (Sona) and this year’s Sona, South Africa has been gripped by the allegations coming out of the Zondo commission, revealing the extent and depth of the corruption at different levels of the state.
A big feature of Ramaphosa’s presidency has been to clean up — to show his administration is serious about rooting out corruption and restoring the credibility of institutions that have been the subject of state capture allegations, including the South African Revenue Service (Sars), the National Prosecuting Authority, the Hawks and the Public Investment Corporation (PIC).
He established an inquiry into the fitness for office of two senior prosecutors in Nomgcobo Jiba and Lawrence Mrwebi, who had been rebuked by judges in a number of sensitive and highly political court cases — including the infamous “spy tapes” litigation, which was connected to the NPA’s unlawful decision to drop corruption charges against former president Jacob Zuma. The inquiry is still underway, chaired by retired Constitutional Court justice Yvonne Mokgoro. The NPA Act requires such an inquiry before deputy national directors and special directors can be removed.
Ramaphosa acted quickly and decisively on the recommendation of the Nugent commission that former Sars commissioner Tom Moyane, who retired judge Robert Nugent found had decimated the institution, should be removed and has successfully defended his decision in court when challenged by Moyane.
As soon as the Constitutional Court ruled that former National Director of Public Prosecutions Shaun Abrahams’s appointment to the top job was invalid, he set about finding a new head and adopted an unprecedented procedure — including public interviews of candidates — to choose Abrahams’s successor.
The choice of Shamila Batohi has been widely welcomed. His appointment of Godfrey Lebeya as the new head of the Hawks was also welcomed.
A commission into allegations of wrongdoing at the PIC is also underway, but before it had even finished, the entire board resigned — enabling a fresh start for the institution that invests trillions in government employee’s pension funds.
However, inquiries, panels and commissions have in the past not necessarily led to proper accountability and have even sometimes been used as a way to park political hot potatoes while avoiding accusations that nothing is being done — the Marikana commission and the arms deal commission being two that are often cited.
Speaking at the Mining Indaba in Cape Town this week, Ramaphosa is reported to have said that his government will act on the recommendations of the commissions. “The criminal justice system will get into action and act against wrongdoing. There has to be accountability. I have called for those that have been found to have done wrong things to be accountable. There will be prosecutions and so people will end up going to jail and will wear orange overalls,” Ramaphosa is reported to have said.
Then, on the eve of Sona, the Hawks — who have been criticised for always “circling” but never swooping — finally acted and arrested some of those implicated in corruption and money laundering at Bosasa. Whether the arrests will lead to successful prosecutions remains to be seen. A similar swoop in relation to the Estina dairy farm scandal around this time last year flopped spectacularly.
Who’d want to be Cyril Ramaphosa right now?
There’s an economy-eating monster on the loose ready to devour everything and anything in its path. The more you feed it, the hungrier it gets. But it has to be fed. We get our energy from it. But it has to be stopped; left loose for much longer it will be the only thing left on a blighted landscape.
We’ll get up in the morning and work all day like ancient temple workers, attending to its every needs as though it was a god and us, its minions.
The monster is Eskom, now widely acknowledged to have achieved rarified TBTF status, the truly scary acronym which stands for Too Big To Fail. This is not easy to achieve: you only crack such a lofty rank when failure means if you go down, you take us all down.
Everytime we hear now from our own homegrown TBTF it is eating more. It was projecting a R15-billion loss for the year, but that was in November, today the figure is R20-billion. It needed tariff increases of 15% a year for the next three years to keep its lights on, now it’s 17% for the first year and 15.4% and 15.5% for the years thereafter. And it needs at least R100-billion, in one form or the other, from government.
Ramaphosa knows that this is his biggest problem and has undertaken to address it in his State of the Nation address tonight. It is by no means his only problem. Our state-owned enterprises are a wasteland of Eskom mini-me’s while the various commissions of inquiry, a hive of activity in an otherwise more or less moribund economy, trip over more corruption and malfeasance on a daily basis.
The civil service is overstaffed and overpaid, as is the cabinet, as acknowledged by Ramaphosa when he came to office just one Sona ago. His cabinet includes those fingered in corruption allegations, but who also represent one of the two ANC factions which Ramaphosa is trying to keep together.
But, as is also well-known, an election looms, so the capacity to engage in meaningful reforms, is being kicked down the road.
But back to Eskom. Ramaphosa has a high-powered committee working to turn the monster into a sustainable enterprise. No matter how you look at it, this will not be easy. But one indicator, the price at which Eskom raises money, suggests that those called to fund its turnaround, bond investors, believe that Ramaphosa may be up to the task. Bloomberg reported this week “even before Ramaphosa said on Tuesday the nation won’t allow Eskom to fail, the company’s bonds were trading as if its troubles were over.
“The premium investors demand to hold the company’s 10-year dollar bonds rather than US treasuries dropped this week to the lowest since the securities were issued in August. That suggests traders were bullish about a much-anticipated rescue plan for the utility, deemed ‘too big to fail’ by the World Bank,” it reported.
When it comes to state-owned enterprises Ramaphosa is walking a tightrope. Although he needs to reassure South Africans that government has a coherent and practical plan that does not require billions more pumped into ailing state companies, he also needs to reassure unions in an election year that much-needed cost cutting will not only rely on headcount reduction.
Cutting numbers is necessary at Eskom, South African Airways (SAA), the SABC, and to a lesser extent Transnet. But, if he is to successfully sell this to the unions, he will need to show there is political will to hold senior executives responsible for the corruption and maladministration that crippled these state-owned enterprises to account.
He will also need to demonstrate that since his first State of the Nation address last February, government has been able to implement other promised efficiencies.
Ramaphosa will also have to present a clear plan on Eskom. Speculation of the shape, form, and effect of the plan to unbundle Eskom into three entities to provide generation, transmission, and distribution will lead to growing discontent among the labour ranks as it has already prompted fears of privatisation and loss of jobs.
SAA, which recently announced a R3.5-billion lifeline from commercial banks, still needs a cash injection to the order of R21-billion for a successful turnaround.
Numbers thrown around internally at SAA over the past two years show the airline needs to cull at least 1 000 jobs and also give a serious relook at employee benefits, which include up to 52 free local and international flights for certain levels of employees and their spouses.
Estimates out in 2018 showed Eskom needs to shed between 4 000 and 5 000 jobs, while the SABC recently halted, at the instruction of Communications Minister Stella Ndabeni-Abrahams, its own plans to retrench 2 000 employees at Auckland Park.
Government talks a lot about looking after the environment. But, at its showpiece Sona scene-setter each year, the focus continues to be about exploiting natural resources and using this to jumpstart the economy. Mining is king. Despite mines polluting the water people drink, the air they breathe and the environment they live in, it remains an unquestioned pillar of government planning.
It is perhaps a telling coincidence that the annual Invest in Africa Mining Indaba is on during the same week as the State of the Nation address, in the same city. In his keynote speech at the indaba this week, Ramaphosa enthusiastically noted that three big investments — out of a total of R270-billion that he said was being invested by corporations — were in the mining sector.
Calling mining in South Africa a “sunrise industry”, he said that the industry is a “key player in the future growth and development of our economy”. To help it grow, he said that “we have prioritised the restoration of a policy and regulatory environment that is stable and predictable”.
Stability and predictability are codewords for sidelining environmental regulations. Former President Zuma prefered the term “red tape” when discussing laws created to protect people from the worst effects of mining and other industries. Getting rid of that red tape meant taking regulatory oversight over the environment around mines from the environment department and giving it to the minerals department.
That department doesn’t have trained environmental inspectors. Its core mandate — to promote mining — is also at odds with the instinct to reign mines in. In effect, Zuma was creating a legal path for mines to do what they want.
Not that this is anything new.
Mining has had carte blanche for over a century. Still-burning coal mines, water and air pollution as well as silicosis and other human impacts are just some of the collateral damage. The state has also been left to clean up more than 6 000 abandoned mines.
Also speaking at the mining indaba, minerals minister Gwede Mantashe continued this thinking. He has invested a lot of time and energy since becoming a minister a year ago in trying to get the go-ahead for a controversial mine in the sand dunes of the Eastern Cape’s Wild Coast.
Parts of the community have objected to the mine for years. Last year, a court ruled that community approval had to be sought for any mining to go ahead.
Mantashe said his department is appealing that ruling. “If you ask for full community approval, you transfer the authority of licensing from the state to the community.” In South Africa law, you might own the land but the government owns what is under the land. You don’t need to agree if someone wants to exploit what’s under the soil. This ruling changes that. Mantashe complained that; “If you do that you create a chaotic situation.”
In his own speech, after praising mining, Ramaphosa did give a nod towards this ruling, saying: “We live in a world where people no longer want to have things around them happen without their knowledge and involvement. They want to have their views heeded.”
We’ll have to wait for tonight to see which version of the environment government wants to look after gets mentioned — the one that sustains life or the one that gives short-term economic returns. History says politicians care about the short-term.