Gov­ern­ment’s high earn­ers

They claim it’s about skills re­ten­tion

Finweek English Edition - - Cover -

PUB­LIC SEC­TOR WAGES at State-owned en­ter­prises – in most cases, mo­nop­o­lies – have drawn more than their fair share of crit­i­cism over the past 12 months. The line be­tween com­pen­sa­tion and per­for­mance has in many cases been blurred. The big is­sue con­cern­ing Eskom’s meaty per­for­mance bonuses was that they were paid de­spite the pub­lic cor­po­ra­tion’s fail­ure in Jan­uary this year to pre­vent the rolling black­outs that threat­ened to crip­ple South Africa’s econ­omy. It emerged that pro­vid­ing elec­tric­ity wasn’t part of the per­for­mance mea­sure­ment cri­te­ria used to de­cide ex­ec­u­tive salaries. In Jan­uary, then Pub­lic En­ter­prises Min­is­ter Alec Er­win de­fended salaries as be­ing “mar­ket-re­lated”.

There was out­rage at rev­e­la­tions that for­mer Eskom CEO Thu­lani Gcabashe earned R13m in 2005, de­spite wide­spread power cuts dur­ing his ten­ure linked to fail­ures at the Koe­berg nu­clear power sta­tion in the Cape. The de­ci­sion by Gcabashe’s re­place­ment Ja­cob Maroga to for­feit his bonus ear­lier this year (and the re­main­ing ex­ec­u­tive direc­tors’ de­ci­sion to take 50% cuts in their bonuses) helped quell some of the pub­lic out­rage. How­ever, their over­all cost to the com­pany in­creased by more than 25% in the year to March 2008.

It has also emerged that SA Air­ways CEO Khaya Ngqula has been paid al­most R20m since his ap­point­ment in 2004. He has re­ceived gen­er­ous salary pay­ments of around R5m/year as well as a per­for­mance bonus of R1,85m in 2005/06 and, sub­se­quently, a much crit­i­cised “re­ten­tion pre­mium” of nearly R690 000 – that de­spite SAA con­tin­u­ing to sus­tain op­er­at­ing losses and re­ceiv­ing con­tin­ued Gov­ern­ment bail-outs.

The pub­lic re­ac­tion to the in­creases af­forded to the most se­nior mem­bers of the SA Re­serve Bank has been vo­cal due to the fact that its Gov­er­nor, Tito Mboweni – de­spite his calls for con­sumer aus­ter­ity – ac­cepted a 27,5% pay in­crease. Re­serve Bank direc­tors, who had con­structed the new salaries for se­nior Bank mem­bers, ap­peared to miss the point that Mboweni, who’d be­rated unions and cor­po­rate SA about the con­se­quences of dou­ble-digit in­creases, had him­self ac­cepted a pack­age that in­creased guar­an­teed re­mu­ner­a­tion by twice the rate of inflation at the time to R3,796m.

Chair­man of the Bank’s au­dit com­mit­tee, Len Konar, in­sisted Mboweni didn’t de­cide his own re­mu­ner­a­tion. Head of the re­mu­ner­a­tion com­mit­tee, Thandi Ore- lyn, said out­side con­sul­tants had been brought in to make rec­om­men­da­tions and sug­gested it was time for Mboweni’s pay to catch up with “in­dus­try norms” af­ter hav­ing ac­cepted low, sin­gle digit in­creases in pre­vi­ous years.

The Bank in­sisted it had con­sid­ered re­mu­ner­a­tion at other cen­tral banks, com­mer­cial banks and State-owned en­ti­ties as part of its salary re­view. Mboweni's pay rise was beaten by deputy gov­er­nor, Xo­lile Guma, whose re­mu­ner­a­tion was in­creased by 66,4% to R2,774m, while Renosi Mokate, the Bank’s other deputy, re­ceived a 72,7% pay hike to R2,839m.

Any moral high ground Mboweni may have had was erad­i­cated by the de­ci­sion to award him a big wage in­crease.

How­ever, not even her most se­ri­ous de­trac­tors ques­tioned Transnet CEO Maria Ramos’s R5,1m in guar­an­teed re­mu­ner­a­tion – plus her bonus of about R3m – ear­lier this year, de­spite the fact her pay was higher than that stip­u­lated in the Depart­ment of Pub­lic En­ter­prises’ guide­lines on guar­an­teed pack­ages. The guide­lines sug­gest heads of large pub­lic sec­tor or­gan­i­sa­tions shouldn’t be paid more than R3,1m/year.

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