SAA directors surprise by throwing in the towel

THE AMAZING thing is not that eight SAA directors, including the chair, abandoned ship, as it were, but that anyone ever managed to persuade them to board it in the first place. There is the seemingly widely held notion that a job in the government sector is the way to a very generously rewarded easy life. Well, that may be the case for fulltime employees but it certainly is not the case for directors of parastatals or at least not for directors on the SAA board.

According to information provided in the SAA annual report for the 12 months to March last year, yes, as you know we are still waiting for the March 2012 report, the fees paid to directors are exceptionally low.

Cheryl Carolus received R828 000 as chairwoman and the average for other nonexecutives was around R350 000 last year. Apparently the fees for 2012 are little-changed as there was no attempt to bring the fees into line with those paid in the private sector because of an initiative launched by Barbara Hogan some years back. And then there’s the time commitment. A number of directors approached by Business Report indicated that they had to spend at least four days a month on SAA matters. The time commitment was apparently why many of them were considering retiring before they decided instead to just rush for the exit.

Given the relatively low pay and high time commitment you would think that your only shareholder would make some effort to ensure things ran as smoothly as possible and that support would be available where necessary. But apparently not.

The Department of Public Enterprises’ failure to secure the necessary government guarantee was the last straw. Without it not only could the auditors not sign off the 2012 financial statements but the board was vulnerable to attack on a variety of fronts and in their personal capacity. No wonder they walked.

Politics

President Jacob Zuma has provided written replies to a question from one of his ruling party MPs, Mbuyiselo Jacobs, who asked about the “average performance of each minister (in the cabinet)”. The MP also asked what was the “top 10” rating of the ministers and what measures had been put in place to tackle underperforming ministers.

The reply was that the president had entered into performance agreements with his ministers “in order to formally provide them with an indication of what he expects them to achieve with regard to the priorities of (the) government”. The president met with the ministers “periodically in order to review their progress against their performance agreements”.

During these meetings the president and the ministers discussed progress against the targets in the performance agreements and “agree on what needs to be done to address challenges”.

The intention of this process was aimed at improving the performance of the government by getting ministers and departments to focus on priority issues and to increase co-ordination between various ministers, the president said.

“There is no legal framework for performance agreements between members of the executive and the performance agreements between the president and the ministers,” the president reported.

He could decide “at his own discretion how to deal with underperforming ministers”, and was “under no obligation to give any reasons for the appointment or release of ministers”.

Answers about top performance and “top 10” rating were not provided. Presumably, these are a state secret.

SAIRR

Economic and social realities are closely linked. Seeking reasons for South Africa’s chronically high unemployment rate, analysts have largely overlooked the impact on the economy of the country’s dysfunctional family life.

Even in the good times, South Africa has been unable to grow much above 5 percent a year. Economists calculate that, to achieve the government’s target of creating 500 000 jobs a year, the economy would have to grow by at least 7 percent. So, the job target seems beyond reach.

Analysts seeking explanations for the country’s inability to generate enough jobs have identified a range of logjams. High on the list is the lack of skills and the failure of the education system to equip pupils to earn a living. The SA Institute of Race Relations (SAIRR) says family life in South Africa is characterised by a decline in marriage and marked increases in the number of single-parent households, children growing up without a father, orphaned children and teenage pregnancy.

“Between 1996 and 2010, the proportion of children with absent fathers increased by 14 percent. “Some 47 percent of children had absent, but living fathers in 2010, compared with 16 percent whose fathers were deceased and 37 percent whose fathers were present.”

SAIRR says fatherless boys are “prone to engage in over-compensatory masculine behaviour” and fatherless girls “are more likely to experience lower self esteem, higher levels of risky sexual behaviour and more difficulties in romantic relationships”. Boys and girls are set on a course of self destruction from an early age.

This vicious cycle is producing children who are unlikely to achieve at school, or in the workplace. Members of the government and other influential people should give some thought to the example their family life sets to the nation.

THE PETROL price is about to rise by 23c a litre tomorrow, a downside risk for the Reserve Bank’s inflation outlook. Our overreliance on imported oil is the predominant driver of this inflation and points to the need for fundamental changes in the way we think about energy.

An inevitable weakening of the rand in the wake of the Moody’s Investors Service rating downgrade, combined with an increasing global oil price, are the causal factors in the equation. It is, therefore, becoming increasingly important that we reduce our dependence on oil imports. It is time to seriously consider a transition to a low-carbon economy, while at the same time ensuring security of energy supply.

At this point, however, uncertainty as to future electricity supply abounds. Eskom, for instance, does not have any planned capital expenditure beyond Medupi and Kusile. Given that it has already breached the international benchmark of a 15 percent reserve electricity supply margin, this is not good news. Worse, though, is that there is no clear plan to secure the 1 000 megawatts that South Africa requires just to get back to the 11.6 percent reserve margin that Eskom has set for itself.

A number of things need to happen, foremost of which is that the Integrated Energy Plan must be changed swiftly. This entails a number of important components.

First, end user appropriateness and market structure must play more of a role in determining sufficient electricity supply. This essentially means that we have to consider the damage to the environment of burning exhaustible fossil fuels and the long-run damage to growth that Eskom’s monopoly will cause.

Economist Daron Acemoglu argues that on the technological front we require breakthroughs in alternative energy and the energy grid to find low-carbon ways of producing and delivering energy. Medupi is hitting cost overruns that may mean coalfired power will cost consumers more than wind. This is ludicrous when one considers the highly differential carbon impact.

But one of the hindrances to entertaining an energy mix involving renewables is Eskom’s monopoly. This highlights the urgent need for the Independent System and Market Operator Bill to be passed. This will allow alternative energy producers to sell electricity to a democratised transmission grid. The bill will also serve to transfer financial risks to the private sector, freeing up government resources.

Second, an energy mix involving gas and downstream beneficiation is critical. The debate around fracking is far from settled. Even if everyone agreed that the method was safe, most would agree that the government is not to be trusted with regulating the process reliably.

But natural gas off the coasts of both Namibia and Mozambique are significant, immediate options for South Africa’s energy mix; they also provide the option of local beneficiation in gas-to-liquid refinement, reducing reliance on imported oil.

Finally, a decision around nuclear must be made swiftly and unequivocally. The capital expense of building conventional nuclear plants is unwarranted and will further contribute to centralisation.

The construction of a new energy mix should dismantle centralisation and Sovietstyle mega projects like Medupi and Kusile (especially if they consolidate Eskom’s power). Nuclear should be abandoned entirely for now, Eskom’s monopoly should be dismantled and natural gas should become an immediate player in our energy mix.