Let the new boards sort out SOEs and repair a decade of damage
There was one central theme at that now infamous Polokwane 2007 leadership conference that elected Jacob Zuma president of the ANC. It was that the capitalist project was unravelling and the best evidence of this was the collapse of the US subprime market. His supporters in the trade unions and the SACP were pushing for the state to now play its leading role in the economy and to distance itself from the market-led policies of Thabo Mbeki. I remember that year as one of much uncertainty, as you had a major UK mortgage player, Northern Rock, alerting markets of its troubles. A year later it would be nationalised by the British government. US investment bank Lehman Brothers would also collapse that year. Capitalism was on its knees and its imperialist overlords in Wall Street had no idea how to save it.
Western governments responded by increasing legislation on the world’s big banks, nationalisation of some in Europe and a concerted push for the world’s leading central bankers to ensure liquidity in the global system to avoid the mistakes of the Great Depression of the 1930s.
SA responded by increasing investment spend, as the country was in a countercyclical position at the end of Trevor Manuel’s term as finance minister. While we now bemoan the state of our finances, with the debt-to-GDP ratio set to breach the 60% mark, when the state started to open those taps it was welcomed by markets.
The second part of SA’s response was to ensure that the ANC, through its policy of “cadre deployment” adopted at that Polokwane conference, got a firmer grip on the functioning of the various organs of state and the state-owned enterprises (SOEs). Zuma’s backers took advantage of a negative sentiment towards big business and the main beneficiaries of the major empowerment deals of the early 2000s, and called for a developmental state.
And through SOEs, at the centre of that spending, the state would lead this development. A criticism of SA was that unlike Australia, we didn’t take greater advantage of the commodity super-cycle because of infrastructure constraints. Eskom, facing an energy shortage, and Transnet, with its own backlogs, were urged to spend with the support of the government.
Basically, these institutions and their executives were given blank cheques to spend in both expanding and upgrading infrastructure — with one caveat. Executives were now more beholden to their political principals because of that “cadre deployment” policy. Ministers such as Malusi Gigaba, who should have been more concerned with policy, with their chairpersons, started acting as recruitment agents under the guise of getting these corporations to run more profitably, in the case of SAA, or to ensure no load-shedding, in the case of Eskom. As we now know, their biggest concern, ultimately, was who was benefiting from their spend. This was the recipe for the disaster that is our SOEs. Decisionmaking was taken from the executives and moved first to Luthuli House, then the family in Saxonwold.
The first step to correcting these institutions is a return of governance, and this starts by ensuring the pre-eminence of the board. Policymakers need to allow boards to lead the institutions guided by their mandates.
I know that these are exceptional times, and in undoing the wrongs of years past much political effort is being put into stopping the cancer of corruption. But there are unintended consequences — it may disempower executives tasked with the turnaround of the SOEs .
Does an employee of Eskom listen to management or to public statements from President Cyril Ramaphosa? It’s a question that the company’s many employees have been asking for the past decade.
Proper governance needs to return, and politicians must draft policies to ensure we never repeat the past decade’s mistakes, where SOEs were led by “executive” chairs such as Dudu Myeni.
It was cadre deployment that drove the rot at SOEs since 2007