To my mind

Finweek English Edition - - 5 april 2007 - BY RIKUS DEL­PORT rikusd@fin­week.co.za

ONE WON­DERS JUST how many well­rea­soned and in­tel­li­gent ar­gu­ments have been swept aside by the state­ment: “We’re go­ing ahead with it be­cause it’s in the in­ter­ests of the coun­try.”

The old Na­tional Party gov­ern­ment usu­ally used it when it granted loans through so-called off-bal­ance sheet fi­nanc­ing to strug­gling state and semi-state in­sti­tu­tions and even to mu­nic­i­pal­i­ties.

Un­der the ANC Gov­ern­ment, this poor ex­cuse is used less fre­quently – thanks to the com­pe­tent lead­er­ship of the De­part­ment of Fi­nance, which at­taches much more value to fis­cal dis­ci­pline. Un­for­tu­nately, we still have some pol­i­cy­mak­ers who don’t fully sub­scribe to fi­nan­cial dis­ci­pline. In fact, there are a few white ele­phants they con­tinue to feed de­spite their be­ing noth­ing but a drain on the econ­omy.

For ex­am­ple, here’s no point in try­ing to keep the Land Bank, with its out­dated busi­ness model, alive. It’s been in in­ten­sive care for far too long. Gov­ern­ment’s latest R700m lifeboat and the R1,5bn soft loan that Trea­sury has had to pro­vide to keep it afloat (prob­a­bly due to po­lit­i­cal pres­sure and not sound busi­ness prin­ci­ples) will merely post­pone the in­evitable for a lit­tle longer.

It ap­pears that the Land Bank’s losses over the past five years were around R5bn and it’s we, the tax­pay­ers, who ul­ti­mately fi­nance it. Those who use the ar­gu­ment of it be­ing in the in­ter­ests of South Africa say that the Land Bank is nec­es­sary to as­sist in pro­vid­ing loans to emerg­ing farm­ers. What non­sense, the bank hardly fi­nances any emerg­ing farm­ers, so its con­tri­bu­tion is min­i­mal.

In fact, most of its losses over the past five years ap­par­ently stem from old loans mainly made to white com­mer­cial farm­ers and agri­cul­tural co-op­er­a­tives. And the big­gest losses over the past year re­sulted from fi­nanc­ing prop­erty de­vel­op­ments that have noth­ing to do with farm­ing. Any­one who be­lieves that the Land Bank can pro­vide a more cost-ef­fec- tive and bet­ter ser­vice to small and emerg­ing farm­ers than SA’s com­mer­cial banks – and smaller, newer banks such as Capitec – is sadly mis­taken.

And those who be­lieve the myth that a coun­try needs a State-sup­ported air­line are equally wrong. It’s true that many coun­tries give their na­tional air­lines some fi­nan­cial sup­port, but there are many in­stances where air­lines don’t re­ceive state sup­port and still man­age to op­er­ate prof­itably. In most cases th­ese suc­cess­ful air­lines are run as private com­pa­nies and com­pete com­mer­cially.

For how much longer will we meekly con­done the fact that we must fi­nance SAA’s losses? Th­ese have al­ready reached the strato­spheric heights of about R12bn over the past five years. Un­der the lead­er­ship of CEO Khaya Ngqula very lit­tle progress has been made in clean­ing up the mess left by his pre­de­ces­sor An­dré Viljoen – even though most air­craft now fly at a ca­pac­ity of more than 70%. The only con­clu­sion is that SAA’s fi­nan­cial free fall is due to bad man­age­ment.

Both the Land Bank and SAA must blame their man­age­ments for the sorry state of af­fairs they’re in. It would have been very dif­fi­cult for their man­age­ments to es­cape con­dem­na­tion had they been private com­pa­nies re­port­ing to private in­vestors.

If we can jus­tify giv­ing an or­gan­i­sa­tion State sup­port, Gov­ern­ment should at least en­sure that it ap­points com­pe­tent peo­ple to its man­age­ment. In­ef­fi­ciency can never be jus­ti­fied – cer­tainly not “in the in­ter­ests of SA”. It’s high time that we fi­nally got rid of th­ese white ele­phants – in the in­ter­ests of the coun­try.

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