Turning around the ship of state needs more than a cabinet reshuffle

The causes of mismanagement are linked to political will and capacity, and the structure of the government

Acabinet reshuffle is no longer a matter of if, but when. The idea of change has been on the cards for a while, prompted initially by the death of minister in the presidency Jackson Mthembu, which created a vacancy in the cabinet.

In addition, the political environment has changed somewhat of late, giving President Cyril Ramaphosa rare dominance in the governing party’s factional tug-of-war. The sense has been created that the influence of his nemesis, Ace Magashule, is on the wane.

At some point Ramaphosa will have to reshuffle his cabinet. The political market is awash with speculation, with an expectation of seismic changes that will improve the management of the economy. Many may be disappointed, since SA’s structural economic problems suggest the ship will take a while to turn around.

It has been suggested that the primary goal would be to turn the management of state-owned enterprises (SOEs) on its head. In that scenario, Ramaphosa would move some SOEs to the policy departments with which they are most closely aligned. For example, the department of transport would oversee SAA and the department of mineral resources & energy Eskom, while Denel would fall under the department of defence.

This “logic” assumes these policy departments could supervise these entities more efficiently than the department of public enterprises. Yet all government departments have been hollowed out through years of state capture. The department of mineral resources & energy is already struggling with its mining task and does not have a fully fledged supervision team to watch over Eskom in addition to its existing functions.

SA has a hybrid system that allows public enterprises to look after the assets while the relevant departments craft policies that look after the industries. Many countries across the world do this. In theory, the current system creates an economy of scope benefit. For example, management governance and shareholding approaches can be standardised across the seven entities under public enterprises, while the policy departments are concerned with broader industry issues. The transport department is meant to create aviation policy for the whole country, for instance, while public enterprises is concerned with the state-owned airline’s success.

The same applies to Eskom, where mineral resources & energy is responsible for overall policy and public enterprises for the performance of the state energy company. There is overlap in this case, since public enterprises minister Pravin Gordhan’s “road map” for Eskom deals with restructuring not just Eskom but the whole sector.

Even on SAA, his articulation of the airline’s restructuring alludes to plans to create a dynamic aviation industry. But the department’s plan for the industry as a whole, including privately owned airlines, is thin on detail. Gordhan would probably argue that this falls under the ambit of transport minister Fikile Mbalula.

Denel is constantly a day away from collapse, but there is no evidence that a different department would change that. It has a liquidity crisis that can’t be resolved by management.

The Land Bank, which falls under the department of agriculture, land reform & rural development, defaulted on its debt liabilities last year with the National Treasury’s eyes wide open.

In June last year, Ramaphosa unveiled an SOE council with a mandate to strengthen the framework governing SOEs, “including the introduction of an overarching act governing SOEs and the determination of an appropriate shareholder ownership model”. The council is intended to “ensure SOE-specific interventions are implemented to stabilise companies through the strengthening of their governance, addressing their immediate liquidity challenges and implementing agreed turnaround strategies.” The inaugural meeting was held only in November.

It is tempting to blame individual politicians when we are frustrated with load-shedding or economic mismanagement. However, the causes of these problems are linked to political will and capacity, and also the structure of the government.

Ramaphosa was elected on a ticket of institutional and industry reform, and there was an expectation that his cabinet would be trimmed down and the administration restructured to enhance delivery. None of that has happened. He has run the national executive along the lines of the Jacob Zuma administration. Promises to change the nature of SOEs have been hollow.

The reason for this lack of action is at the heart of the ANC, specifically its approach to economic management. Testimony before the Zondo commission has revealed the predatory nature of the governing party, with state entities orientated to serve scavenging party-linked tenderpreneurs and the financial interests of the ANC. At an ideological level there is no sense that the Ramaphosa government thinks any differently about the SOEs and the role they play in the economy than his predecessors.

The government’s focus has been on the survival of the SOEs; what can be done to save them and avoid the seismic fiscal risks associated with their decline. Yet there are more than 700 state-owned companies, and most now drain more than they contribute to the economy.

Companies such as Eskom and Transnet are simply too big to fail, anchoring the most basic human activities that are integral to our economic lives. It would be foolhardy to blame, say, Gordhan, for our energy problems, and not consider what effect Gwede Mantashe has had on the situation. Placing Eskom under Mantashe would be to ignore the reality that the government as a whole is bereft of the skills required to run state companies. It would merely burden Mantashe with a problem he too cannot solve.

The big question is whether state and industry reform can stem from political reorganisation. Put differently, can an unreformed ANC reform the state and key economic industries, when the ministers come from the same ANC that is struggling at every level of governance?

Most cabinet members must be chosen from the National Assembly, while Ramaphosa is legally empowered to pick just two people from outside parliament. This political set-up itself may be the biggest impediment to change, with reform destined to be a perpetual manifesto topic.

The capacity of the administration to execute basic tasks is also below par in many respects. Ramaphosa carries a heavy load without the kind of political support that might help him engineer great change. At the same time, our national balance sheet suggests we will have to sell the family silver to get the SOEs out of the quagmire.

However, the thought of selling state entities is anathema in the ANC. This is an area of policy that will need a huge amount of political spadework, so that when the inevitable happens the resistance is manageable and the potential ideological blowback against Ramaphosa can be avoided.

Changing names and reporting lines will rearrange the deckchairs on a sinking ship, when what is required is a coherent, implementable public policy approach to SOEs and state reform.