The priorities for the Government of National Unity (GNU) in South Africa include achieving rapid, inclusive, and sustainable economic growth to create jobs. Commentators agree that that our state-owned entities’ (SOEs) governance process has a serious and never-ending problem due to the political nature of the shareholder. We need to move towards professionalism.
We have 124 different SOEs: the list can be viewed at State-Owned Enterprises and other public institutions | South African Government (www.gov.za). In the past 30 years, it has proved difficult to distinguish between providing the necessary strategic direction to SOEs and undue political influence and interference in their operations.
This is particularly evident in procurement practices that have favoured specific private interests. Pravin Gordhan had his hands full. It is astounding that he has not acknowledged his impossible task and asked for reinforcements. Any general in the field of battle knows when there is a need for serious backup.
1. Mmabatho Mokause, a permanent delegate to the National Council of Provinces (NCOP), sponsored a motion for debate some time ago in the NCOP on the positioning of SOEs as catalysts for economic growth and development to put their situation under scrutiny. “Transnet too has had woeful losses of R2 billion, when not long ago it was a profit-making company. Worst of all is Eskom, Mokause pointed out, which continues to swim in a pool of debt and making financial losses. It’s continuing failure to guarantee energy supply is curtailing economic growth.
After the departure of Pravin Gordhan, his department will no longer be a separate portfolio with its own ministry. Instead, the various SOEs will fall under the Ministry of the President’s Office, whereafter the individual entities revert to their respective departments such as Transnet will go back to the Transport Ministry and the SABC to the Communications Ministry.
The department run by the Office of the Presidency will need to appoint competent individuals of integrity through a transparent and robust process to boards and senior management. In addition, they will need to decide which SOEs are strategic, reform SOE procurement, and review the business models, capital structure, and sources of financing for SOEs. They should identify opportunities for private sector participation while closely monitoring the SOEs’ financial and operational performance and promote greater transparency and accountability to overcome poor governance.
The events unfolding at Eskom is an example of how these matters will be approached. The latest rhetoric about appointing professional and knowledgeable people to positions seems a hollow promise in the light of the appointment of Angie Angie Motshekga to the Defence Ministry.
2. What needs to change? Weak coordination: Under the current arrangements, achieving alignment between line ministries and shareholder ministries has relied on an ad-hoc process of meetings and working groups for SOEs’ different objectives as well as provide the necessary transparency and checks and balances.
There is often an observed gap between formal processes in place and reality on the ground (“ticking the boxes”), as well as the lack of accountability at different levels. This could be traced to the fact that under the current oversight arrangements, the Department of Public Enterprises (DPE) as a ministry cannot recruit adequate professional staff with private sector/commercial experience.
3. The government needs to identify the ideal model for the shareholder institution, while in the past alternative institutional set-ups have been debated, the time for implementation has come. The key concerns relate to building a system that is impervious to state capture and which includes institutional safeguards and checks and balances to protect SOE operations from undue political influence, while ensuring SOEs are well set up to deliver on agreed state objectives. The new structure of the GNU may assist this cause.
This stark contrast between the increasing bailouts provided by the government and the exorbitant earnings of SOE management highlights gross misalignment, especially considering the growing poverty rates and financial struggles faced by ordinary South Africans.
4. The DA’s research has shown that the amount of SOE bailouts has significantly increased in the past six years during President Ramaphosa’s time in office (2018/19 to 2023/24) compared to the previous 10 years (2008/9 to 2017/18). The average annual bailout amount more than quintupled from R9.51 billion per year to R50.49 billion per year. Now that the DA is part of the government we will see how they address the problem.
Eskom is by far the largest recipient of bailouts, receiving nearly five times as much as the second-largest recipient, SAA. The years with the most bailouts coincide with significant increases in bailouts to Eskom and SAA, suggesting that these SOEs are driving the overall trend.
Top five SOEs with the most bailouts
∎ Eskom: R242.25 billion
∎ SAA: R49.90bn
∎ Sanral: R23.74bn
∎ Sasria: R22bn
SA POst Office (Sapo): R14.19bn (including the additional proposed R3.8bn for this year), with this number is likely to increase.
Total bailouts from 2008/09 to 2017/18 (Zuma’s tenure): R105.7bn, averaging to R9.4bn per year. Total bailouts from 2018/19 to 2023/24 (Ramaphosa’s tenure): R292.2bn averaging to R30.4bn per year. With the advent of GNU, we hope we can stem the tide.
5. The salaries of top executives, such as those at Transnet, Prasa, Postbank, and the SABC reached astonishing figures, with compensations for CEOs reaching even higher amounts, regardless of dire performance and eye-watering losses posted by these entities, and the absence in many instances of annual financial statements. Moreover, reports of financial mismanagement and wasteful expenditure within these entities further emphasise the disregard for responsible governance.
Consider the steep earnings of these SOE CEOs:
∎ Transnet: R8.5 million
∎ Prasa: R6.8m
∎ Postbank: R5m
∎ SABC: R5.7m
The minimum wage is set at R52 953.60 for 2024. The above numbers exceed any Gini coefficient number in the world. The top guys earn as much as 160 workers or 1 600% more. Why does the SACP and the workers’ unions support a party that allows such an outrageous situation?
The jaw-dropping compensations for top executives in total are even more shocking:
∎ Transnet: R61.4m
∎ Prasa: R35.1m
∎ SABC: R26.8m
∎ SACAA: R26.6m
This above situation is now behind us, and it was a clear affront to the citizens. Going forwards there will be no more favouring of politically-connected individuals over the well-being of vulnerable South Africans. Let us hope that compensation packages are renegotiated on termination and adjusted to a realistic market-related-level in line with the qualifications of the individual. This will be the type of radical changes that will resonate with voters.
The question on everyone’s lips though is how long GNU will last? For the sake of stability let’s hope it lasts at least until the end of President Cyril Ramaphosa’s second term as president of the ANC which comes to an end in December, 2027 – two years earlier than the next general elections.
Next year South Africa will host the G20 meeting. South Africa will play an important international role in 2025 as president of the G20. The G20 is a group of 19 countries as well as the African Union and the European Union. Between them they represent 85% of the global economy; 75% of world trade; and 67% of the global population. The G20 defines itself as the premier multilateral forum for international economic cooperation.
We must not mess this up, we need to show a united front and use the opportunity to showcase our country so full of potential to the world. The voters expect nothing less.
* Kruger is an independent analyst.
** The views expressed do not necessarily reflect the views of IOL or Independent Media.
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