IF IT WERE NOT SO costly and so damaging, the awesome incompetence of the Department of Public Enterprises (DPE) and its Minister, Alec – he of the sabotaging bolt and “human instrumentrality” – Erwin would be hilariously funny. Erwin appears to believe he’s the reincarnation of Harry Oppenheimer, parading around as a visionary business leader while his charges, such as Eskom and SA Airways, swallow up billions after billions of our taxpayers’ hardearned money.
He punts the old communist line that it’s the State that’s best able to lead growth, which harks back to this drivel recorded in Frederik van Zyl Slabbert’s book The Other Side of History from a 1989 comment by Erwin: “You fat cats have had your chance. When we take over there will be no private property, industry will be fully nationalised and the state will be the only instrument of economic development.”
Talk about fat cats? He’s created more fat cats than any Government minister in the history of the nation. Take, for example, departed Eskom CEO Thulani Gcabashe, who meekly acquiesced to Government’s view that Eskom didn’t need to embark on a substantial expansion of capacity against the clear and unequivocal advice of Eskom’s own planners.
For that pusillanimity Gcabashe earned R13m in 2005 as we hurtled towards national blackouts, soaring electricity costs, huge borrowings and further imposts on the middle classes to subsidise the poor, which is nothing but tax by stealth. In defence of multimillion rand packages for executives at public corporations – including fat bonuses for abysmal performance – Erwin prattles on about those all being “market-related”. Whatever his talents might be, and I fail to see any, they don’t extend to the ability to operate in and make judgements in the market.
For example, a study of the career of Gcabashe will suggest he was in no way qualified to run an enterprise of the size and complexity of Eskom. He isn’t worth even 10% of what he was paid to lead a utility once respected worldwide for its competence. I should have been lucky enough to have had Erwin as a boss. Good heavens, I actually made profits.
An aspect of corporate governance with which Erwin appears not to be familiar is the policy that executives of a company are rarely permitted to hold directorships in unrelated entities. As a CEO I sat on boards such as MNet and Radio 702 as a representative of the company. Any director’s fees went to my employer, not to me.
For example, when MNet was floated non-executive directors were given 100 000 shares each which, in my case, I handed over to the company pension scheme on the principle that were I not the CEO of a company owning shares in MNet, I wouldn’t have been on its board.
It was therefore encouraging to learn that Khaya Ngqula, CEO of SA Airways, another overpaid cadre, appears to have scaled back his outside interests, serving now as a nonexecutive director of only two operating companies: the large, black-owned Worldwide African Investment Holdings and Party Design, an events design and decor company. There were reports that he sat on up to 38 different boards, which made you wonder when he could attend to the troubled affairs of SAA, a large part of which consists of pleading for more billions from the sagacious, shrewd, brilliant and far-sighted Erwin.
Which brings us to the issue of the recent downgrading of Eskom by Moody’s, the rating agency. That comes at an inopportune moment for Eskom, struggling under the burdens created by the absurd refusal of the Mbeki administration to heed the advice of Eskom’s planners, who presciently advised a decade ago that capacity was running out.
Stung by the prospect of hundreds of millions in additional interest costs, Eskom is now courting the World Bank, the African Development Bank and export credit agencies for affordable debt with which to finance some R340bn of expansion.
Perhaps its down-rating – which was quite severe and contained a warning that the bottom might not have been reached – might have been avoided if Government had earlier indicated it would back Eskom’s borrowings and, perhaps more importantly, because it’s always backed those bonds, it had said it would provide our R60bn to Eskom as equity rather than as loans.
One employs the word “ours” advisedly. We, the taxpayers, own Eskom and we’re thus its only shareholders. However, Eskom must recoup its costs from our rates: so the more it has to repay to the State, the higher its rates are going to be. It was the State that screwed this issue up. Now the State wants us to pay not only swingeing increases in rates, but further increases brought about by the costs of the burden of R60bn in new debt that could just as well have been injected into Eskom as equity.
Again, it’s no more than tax by stealth and the Government should be ashamed of itself for resorting to such subterfuge, particularly as it was, by its own admission, its own incompetence and negligence that led to the Eskom crisis in the first place.
It wasn’t possible to obtain comment from Moody’s on how it might have viewed Eskom had Government provided its funding by way of equity rather than debt. But simple investment theory would suggest that any commercial entity would be able to show better ratios and have a better performance outlook if it were financed by permanent capital rather than by debt – which has to be serviced and repaid.
Quite simple, really, Alec. As are you.
STEPHEN MULHOLLAND email@example.com