State ownership may still be best

Corruption has taught SA some tough lessons

It’s tempting to assume our state capture woes would be less nightmarish if President Thabo Mbeki had privatised chunks of state business before they became the playthings of President Jacob Zuma. While it certainly would have reduced the opportunity for plunder it’s likely a privatisation programme would have led to lots of other problems. The most obvious of these would have been political. It is difficult to imagine how what was essentially a newly independent state with a brand new governing party could have sold the idea of privatisation to its supporters. Remember how exercised Cosatu was over the prospect of even a partial privatisation of Telkom? How could anyone imagine the ANC would have walked away from the immense power that comes with owning huge enterprises? These days we tend to think of that power in terms of multibillion-rand tender opportunities. We overlook the greater opportunities those assets provide to shape the form our economy will take. Owning Eskom should not be about allocating tenders to supply coal and build power stations; it should be about ensuring a cheap and steady supply of power to all electricity consumers — just as owning Transnet should be about creating an efficient and cost-effective transport system. That, of course, is the theory. It is to the ANC’S credit that in a bid to protect the country from the worst imagined excesses of corruption it introduced the Public Finance Management Act. Years later the thought that anything might have been able to curb Zuma’s abuses seems quaintly naive. But here’s the thing. If you assume SA is on a steep learning curve, might it not be better to accept the shortterm destruction being wreaked by Zuma and his cronies as an inevitable part of that learning process? No doubt huge damage is being done, but look at the determined pushback from civil society and the judiciary. The end of Zuma will not mean the end of corruption, but whoever comes along next will surely have learnt not to presume we will be tolerant of malfeasance. We are very slowly moving in the right direction. There is also the matter of the doubtful benefits of privatisation. Not only does it diminish government’s ability to influence the economy but benefits tend to accrue to a handful of people. Telkom looks strong now, but it went through a rocky period that began with a suspect BEE transaction that made a few individuals very wealthy. Iscor, whose privatisation began in the 1990s, has benefited none more than the Mittal family. Recent research by the University of Greenwich in the UK suggests easy assumptions about the benefits of privatisation may be misplaced. It found that consumers in England were paying R2.3bn/year more for their privatised water and sewerage system than if the utility had remained in state hands. The nine regional water and sewerage companies have invested no significant new shareholder equity but have extracted nearly all of their posttax profit as dividends. Debt has been accumulated to finance infrastructure. There are no easy ways to avoid the tough lessons we have to learn.

Whoever comes after Zuma will surely have learnt not to presume that we will be tolerant of malfeasance