The Eskom management catch-22

There was a report over the weekend that 480 skilled professionals have offered their help to fix Eskom but the answer was thank you, but no thanks. In the meantime, Public Enterprises Minister, Pravin Gordhan is trying to whip the management of SOEs into shape, saying that if the boards and management of the enterprises which have almost all become blackholes sucking in taxpayers’ money did not undertake the measures dictated by the government to fix them, he would intervene. The problem is this: If the present management at Eskom and many of the other SOEs are not towing the line and Gordhan does not want to take on any old personnel, because of racial quotas; where are the good managers going to come from? From the ranks of the ANC or rejected MPs, many of them who are tainted by allegations of corruption did not make it onto the Parliamentary lists? Judging from the decision of the ANC to nominate many of them to chair Parliamentary standing committees, dubbed by the Democratic Alliance as the ‘Rogue’s Gallery’ that is a distinct possibility if Luthuli House gets its way. As John Kane-Berman points out in this article kindly republished with the Daily Friend’s permission, deputy-president David Mabuza has stated earlier that “people who did not make it on to the ANC’s final national and provincial list…would be deployed to other institutions”.  Investors are likely to say, ‘thank you, but no thanks’, if there is cadre deployment at SOEs. Proper governance and financial management according to Kane-Berman are not the only contradictory demands from Gordhan. – Linda van Tilburg.

Pravin Gordhan reads the riot act to Eskom and co – yet again

By John Kane-Berman*

Pravin Gordhan says that the boards and management of state-owned enterprises (SOEs) must do what the government expects or it would intervene to ensure proper governance and financial management.

Speaking in Parliament last week, the minister of public enterprises, Pravin Gordhan, said that if the boards and management of SOEs did not do what the government expected of them, it would intervene to ensure proper governance and financial management.

Tough words, again, from the man who only three months ago said the previous CEO of Eskom and his colleagues “have a lot to explain to South Africa“.

Mr Gordhan’s latest warnings prompt a number of questions. The first is whether or not the government of which he is a member actually has the capacity to pick people with the capacity to run SOEs. If, as he says, SOEs have been plagued by corruption and mismanagement, the main reason is that many of the people running them were put there by a government of which Cyril Ramaphosa was a senior member. Not only that, Mr Ramaphosa was for many years chairman of the deployment committee of the African National Congress (ANC), which had a major say in the appointment of SOE executives.

Four months ago the deputy president, David Mabuza, said that people who did not make it on to the ANC’s final national and provincial lists for the elections in May would be deployed to other institutions. The scope of deployment was wide, and his party would look at other options so that “we occupy every important point in every important institution”.

So while Mr Gordhan said last week that state capture was a major reason for the plight of major SOEs, Mr Mabuza has reminded us that it remains the policy of his party. He did so at more or less the same time as a former deputy finance minister, Mcebisi Jonas, was telling the commission of enquiry into state capture under Raymond Zondo that state capture should not be “over-Zumanised”. The country, Mr Jonas said, should build a wall between party and state.

This idea of course flies in the face of the modus operandi of the ANC. Whether Mr Gordhan is willing to flout the cadre deployment policy, or whether he will be allowed to, remains to be seen.

The second question is whether it is clear what the government expects SOEs to do. Earlier this year, Mr Ramaphosa said that they should be “fully self-sufficient” and “able to fulfil their development and economic role”. These are contradictory demands. Mr Gordhan said last week that the government as shareholder would intervene if SOE boards did not deliver on the outcomes expected of them. Would the government then override or dismiss boards who argued that they could not deliver on these outcomes and also be self-sufficient?

Mr Gordhan himself neatly captures another contradiction. In January he said that good people had been lost and incompetent people put in their place at Eskom, resulting in technical breakdowns. In March he denied that racial transformation was in any way to blame for the failures at Eskom. It was indeed “a strategic imperative”.

Now we have boards that have to be self-sufficient, deliver on the outcomes laid down for them, and implement racial transformation. So the third question is whether SOE boards will be expected to achieve self-sufficiency while at the same time adhering to racial procurement requirements that will inevitably put up costs. Mr Gordhan in his capacity as finance minister was responsible for promulgating the relevant preferential procurement regulations last year. According to a statement three months ago by Sakeliga, Eskom is “increasingly stipulating race-based pre-qualification criteria in its tender documents”. Sakeliga is currently seeking to challenge the regulations in the courts.

Mr Gordhan also said that the boards and management of SOEs would be expected to stabilise finances and reduce dependency on the fiscus. This prompts a fourth question: whether SOE boards seeking to reduce such dependency will be permitted to retrench staff, as both Eskom and the SABC tried to do some time back, only to be thwarted by Mr Ramaphosa’s government.

Mr Gordhan said that SOEs required “leadership that is courageous and prepared to take difficult decisions such as cost-containment and revisiting wrong procurement decisions”. This prompts a fifth question. Would the government be willing to appoint suitably courageous leaders? And, finally, if such leaders took difficult decisions, would the Cabinet and the ANC back them or undermine them?

  • John Kane-Berman is a policy fellow at the IRR. If you like what you have just read, become a Friend of the IRR if you aren’t already one by SMSing your name to 32823 or clicking here. Each SMS costs R1.’ Terms & Conditions Apply.