My Deep Throat tells all

Anony­mous busi­ness­man spills the beans…

Finweek English Edition - - Openers - BY STEPHEN MUL­HOL­LAND stephenm@fin­week.co.za

A BUSI­NESS­MAN – who in­forms me that he has po­lit­i­cal views de­cid­edly dif­fer­ent to mine – has writ­ten anony­mously to say that he does, how­ever, agree with the view that black eco­nomic em­pow­er­ment has been poorly im­ple­mented.

Now in­stead of em­pow­er­ing the peo­ple by dis­tribut­ing to them a por­tion of the wealth that’s been dished out in the name of em­pow­er­ment, the sys­tem – as has been widely ac­cepted and is patently ob­vi­ous – has en­riched a favoured few, in­clud­ing a rich, well-ed­u­cated, highly priv­i­leged white wo­man called Wendy Lu­cas Bull.

It’s un­der­stand­able that among Gov­ern­ment’s ob­jec­tives has been the rapid cre­ation of a black class of busi­ness lead­ers. They serve as role mod­els, move us away from white hege­mony in busi­ness, give black peo­ple a sense of pride in their achieve­ments and pro­vide sym­bols of the new South Africa.

It was also highly prefer­able to na­tion­al­i­sa­tion of what col­lec­tivists lov­ingly call the com­mand­ing heights of the econ­omy.

It was not, of course, mu­tu­ally exclusive to si­mul­ta­ne­ously en­cour­age, by fis­cal and other means, the dis­tri­bu­tion of wealth through shares or straight cash pay­ments to the mil­lions of our poor.

One pain­less method would have been to per­suade, en­cour­age or even force, if nec­es­sary, all listed com­pa­nies to is­sue a small per­cent­age of their share cap­i­tal to a fund for the masses. That could have been used for good works but, prefer­ably, just for dis­tri­bu­tion of cash to poor peo­ple.

Gov­ern­ments, of course, don’t trust peo­ple to spend money wisely. That abil­ity is re­served for pub­lic ser­vants. How­ever, he­li­copters drop­ping loads of cash on im­pov­er­ished hill­side vil­lages would, for ex­am­ple, do so much more good than in­com­pe­tent Gov­ern­ment de­part­ments dish­ing it out – af­ter steal­ing a healthy slice of it.

A study, done no doubt with tongue in cheek, in the United States de­ter­mined that by ap­ply­ing the mul­ti­plier ef­fect and an al­go­rithm of per­sonal de­sires for self-im­prove­ment, money dropped from a he­li­copter over New York’s Man­hat­tan would have had a ben­e­fi­cial ef­fect sev­eral times greater than an equiv­a­lent amount spent by bu­reau­crats on be­half of the poor.

But that op­por­tu­nity was missed in SA’s great em­pow­er­ment wave.

My correspondent refers at length in his let­ter to a clas­sic ex­am­ple in the Na­tional Lot­tery (Lotto) con­tract of how em­pow­er­ment has gone wrong. He ze­roes in on Bongani Khu­malo, whose curious ca­reer seems hardly to have equipped him for the po­si­tion as chair­man of the Gi­dani con­sor­tium.

As is well known, Gi­dani – hav­ing been se­lected by our Min­is­ter of Trade & In­dus­try Man­disa Mpahlwa to suc­ceed Uthingo as the Lotto man­ager – is now in le­gal limbo fol­low­ing a de­ci­sion by Judge Wil­lie Ser­iti in the Pre­to­ria High Court.

Judge Ser­iti ruled that the Na­tional Lot­tery Board had failed to in­ves­ti­gate the share­hold­ers of both bid­ders. He de­cided, in essence, that the min­is­ter lacked all the rel­e­vant in­for­ma­tion when award­ing the con­tract.

Free­dom in gen­eral, and the ju­di­cial sys­tem in par­tic­u­lar, owe a great debt of grat­i­tude to Judge Ser­iti. He as­sessed the sit­u­a­tion on to­tally ob­jec­tive grounds, ig­nor­ing in the process the in­ter­ests of pow­er­ful po­lit­i­cal play­ers.

And it seems that, in hir­ing Khu­malo as its chair, the curious amal­gam of ANC, union, Greek and re­put­edly Rus­sian share­hold­ers in the Gi­dani con­sor­tium did it­self no favours. What­ever his mer­its might be, Khu­malo has a busi­ness back­ground that doesn’t fill the ob­server with con­fi­dence. As my anony­mous correspondent writes, Khu­malo “was fast-tracked through the fa­mous af­fir­ma­tive ac­tion HR route to be­come deputy CE at Eskom in the mid-Nineties. “It was dur­ing that pe­riod – when he was one of the top three de­ci­sion-mak­ers (and the one specif­i­cally tasked with “strat­egy”) – the de­ci­sion to (a) moth­ball sev­eral ex­ist­ing power sta­tions and (b) not com­mis­sion­ing any new ones, was taken. The stu­pid­ity of that de­ci­sion is now be­ing seen in our elec­tric­ity sup­ply short­ages.”

Khu­malo wasn’t se­lected to suc­ceed then out­go­ing Eskom CEO Allen Morgan but was quickly res­cued by an ap­point­ment as ad­viser to Pres­i­dent Thabo Mbeki on – wait for it, folks – HIV/Aids.

Af­ter that de­ba­cle, which earned us in­ter­na­tional and sci­en­tific hu­mil­i­a­tion, the State in 2001 ap­pointed Khu­malo as chair­man of Transnet. Surely we were now safe from his in­creas­ingly ob­vi­ous and to­tal in­com­pe­tence. But no. In Septem­ber 2004 Khu­malo’s min­ders in Gov­ern­ment had to swal­low their pride, along with their clear af­fec­tion for this ge­nius, and sacked him from the Transnet chair af­ter a loss of R6,3bn.

That waste of tax­pay­ers’ money came largely as a re­sult, writes my correspondent, of the “(in)fa­mous hedg­ing ac­tiv­i­ties un­der­taken by South African Air­ways on his watch in 2002”.

“It’s no sur­prise,” writes our anony­mous deep throat, “that a chair­man of the board who wouldn’t know the dif­fer­ence be­tween a deriva­tive and a dingo ap­proved that ‘hedg­ing’ and went so far as to sign a let­ter to the SA Re­serve Bank ad­vo­cat­ing its ap­proval by them.”

Our deep throat adds that Khu­malo’s Transnet of­fice ex­penses were of the or­der of R30m/year, in­clud­ing the grandly named “Of­fice of Pro­to­col”. From that vast struc­ture min­ions ran about the coun­try ar­rang­ing Khu­malo’s vis­its. Lifts were set aside (from the pre­vi­ous evening) for his per­sonal use while se­nior aides rushed around en­sur­ing that the park­ing bay near­est the lifts was kept avail­able strictly for Chair­man Khu­malo.

Af­ter Transnet, Khu­malo bumped around, from Grey Ad­ver­tis­ing to prop­erty group JHI, be­fore land­ing, once again, with his bum in ap­par­ent but­ter at Gi­dani with its colour­ful back­ers.

Thus is the tale of one em­pow­er­ment saga, which typ­i­fies what has sadly been the pat­tern in what might have been a highly pro­duc­tive approach to the re­lease of SA from a racial night­mare to democ­racy and a dy­namic free mar­ket.

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