Solving the Problems of State-Owned Enterprises

South Africa State-owned enterprises and Government Departments are suffering a meltdown.  This is nothing new.  It has been building since 1994, when the cause of the problem was introduced by the new Government.  It became clear very quickly after the ANC government took power in 1994 that the Party was intent on replacing the relatively competent top management of these entities with their own people, a policy which has become known as cadre deployment.  Bear in mind that it has been a consistent claim of the ANC that the Apartheid Government failed to provide adequate employment to Blacks.  The ANC was therefore forced to choose the new management of the economy from the ranks of poorly-educated people. 

One can perhaps sympathise with the sentiment.  As Gwede Mantashe pointed out, even in the United States, the new Party coming to power places its own people in the top positions.  He failed to point out that, in the United States, there is a very large pool of competent and experienced Republicans or Democrats to choose from, which gives at least a possibility of the new appointees being at least partly competent.  That pool was not available to the ANC.  It is still not available.  The training in the real world, and the gaining of relevant experience necessary to hold a top position, anywhere in the world, requires decades.  If we accept the ANC argument that the education of Blacks under Apartheid was abjectly poor, we must also accept the argument that any Black who has risen through the ranks since the vastly-improved education system has been available to them can have no more than six to eight years experience.  That is hardly sufficient to produce a well-rounded and competent management!

The effect of this, and of the fact that the top people in many of the Government-controlled entities were selected more for their Party loyalty than for their business experience and managerial excellence, is that practically every State entity is suffering from decades of incompetence, lack of managerial experience and corruption ranging from nepotism through to outright fraud.  Let us examine briefly several of them.

Eskom has demonstrated clearly that it has no idea of planned maintenance, information flow, planning or virtually any other aspect of management necessary to operate a major industrial undertaking.  The Minister made a noteworthy statement recently, that Eskom is not in a state of crisis.  That would arise, in her opinion, only if the electricity blackouts were unplanned!  A series of planned blackouts, even if they were planned less than an hour before they occurred, could therefore not be called a crisis!  One is reminded of the fatuous statement made by President Thabo Mbeki that AIDS is a syndrome, and a syndrome cannot cause a disease!  Eskom is presently remaining in operation largely because it has employed the services, at very high cost, of a number of foreign experts, who are managing to hold together what few strands of the Eskom fabric that remain from the Apartheid years.  The performance of Eskom since it has been managed by ANC appointees, rather than competent, experienced and qualified managers has been abysmal, with estimates that it alone has cost South Africa more than 10% of its potential GDP, and will continue to do so into the indefinite future.  Both the Minister and the CEO of Eskom would be fired in any civilized country.

South African Airways has also shown the ineffectiveness of its top management, requiring an annual bailout from State coffers in the hundreds of millions of Rands.  The rot started early in the ANC period, when the man who ran Delta Airways into the ground was appointed to run the company, with a pay package that was based on profit, a system that induced him to sell the entire fleet of (fully-paid) Boeings and replace them with a new fleet of (leased) Airbuses, a move that earned him a terminal bonus of R600 000 000.  One wonders what split the ANC and its people could have taken in that bonus, and what commission would have been paid to them for the acquisition of the new fleet, a move which cost the company hundreds of millions in retraining, retooling, new spares acquisition and many other areas, and which planted the seeds for the gradual disintegration of the company.  The multiple new management teams have achieved only the acceleration of that disintegration, with no end in sight.

The South African Broadcasting Corporation is another State-owned entity that has lived down to the reputation that Government-controlled bodies have earned.  Need one say more than that the two top positions in the Corporation have been occupied by persons who have lied about their qualification?  The fact that they can have been appointed without any check on the qualifications they claimed to possess is a clear indictment of the management systems of the corporation.

The Atomic Energy Corporation, a body that could stand in the company of the top five nuclear research organisations in the world, was closed down by the Government with great fanfare and at huge cost shortly after the ANC took control, and its installations were dismantled, with copper wiring being removed from the buildings to sell in order to pay the salaries.  In 2014, the Government announced, with great fanfare, that it intended to establish a nuclear research facility, at great cost.  One would be tempted to ask whether any thought and planning had gone into either of those moves.

The Council for Industrial Research was, under the Apartheid Government, a centre of excellence in research and development.  Under the present Government, one of its scientists was censured for wishing to present a paper at a science conference, discussing the abjectly poor state of municipal water supply in South Africa.  The paper included an example of one municipal water treatment works, in which a machine broke down.  The Manager f the works, an ANC appointee, did not understand the function of the machine, so, rather than repair it, he took it offline, allowing the bulk pollutants, such as diapers and tampons, to flow through, resulting in worms being common in the supply to domestic users.  The scientist was rebuked for his planned paper, which would bring the Government and the CSIR into disrepute!  He subsequently resigned, leaving his position open to be filled by another ANC appointee.

The Johannesburg Municipal Health Service established a new section to deal with an important health issue, and appointed an ANC-qualified woman to head it.  She managed to exhaust the entire annual budget of the section by the appointment of several administrative staff, also of the right racial and political persuasion, and the purchase of a fleet of luxury cars for them.  There was, apparently, no effective budgetary or monetary control of her expenditure or appointments.  One need only look at the state of the municipal clinics to see how ineffectual the management of the Health Service is.  It is commonplace for users of these services to queue from five-thirty a.m., to be dealt with by four, when the clinic closes, or, even worse, to be told at that time that they will have to return tomorrow, because the doctor had to leave at twelve!  A quick count on several days at eight in the morning of the people waiting patiently in the queue disclosed that there were at least three hundred people already waiting at that time.  If we assume an average salary of only R5 000 per month, and an average work loss of six hours, that amounts to a staggering wastage of 380 000 man-hours per month per clinic, over 47 000 man-hours of work lost, a salary cost of about R11 000 000 per month per clinic!

The Departments of Education have consistently set new records in poor performance.  Schoolbooks are not delivered, on time or at all.  Teachers are off work for more than 10% of the teaching year, and their qualifications are so poor that many of them would not be able to pass the examinations that they are teaching towards.  The Union does not want regular examination or inspection of the state of the teaching, because that would imply a comparison of their members with an objective standard.  The examination results are adjusted to ensure that at least a certain number of the students pass the matric examinations, the pass mark is adjusted downwards to a level that makes employers question the value of the certification, while the students are pumped out into the non-existent) workplace, and the universities are told that they must accept candidates for degrees, regardless of their performance at school, because to do otherwise would be discriminatory.  The Law Society issues a report that states that newly-graduated Ll Bs are unable to use language effectively.  The coal-storage silos at power stations, designed by engineering graduates, collapse.  A lecturer in engineering at one of the major universities resigns, declaring that he is not willing to compromise the standards of education merely to accommodate a Government demand that the university produces the required number of Black engineers each year, regardless of their capabilities.  There can be no doubt that the management of education in South Africa is not at even the minimum level for a Third World country, never mind a country that aspires to lead the continent.

The South African Revenue Services established a unit to investigate tax matters, and that unit was reportedly then directed to undertake investigations in the political arena that had nothing to do with tax issues.  The people who objected to that were suspended without proper formalities being complied with, leading to a judgement in the High Court reversing those suspension.  A matter of this importance must have been known to the top management of SARS, leading to the view that the top managers were acting improperly, in contravention of the law.  If they did not know of this matter, the only conclusion can be that they were not competent to hold the positions.

The South African Police Services pays out in excess of a hundred million Rands each year under High Court judgements in claims for wrongful arrest.  The Police Stations in the Western Cape are so understaffed, to the knowledge of the Police high command, that gangsterism is running rife and hundreds of children are killed every year.  Police killings of innocent civilians are reported weekly.  A Commissioner of Police was reported to have called in the assistance of seven sangomas (witch doctors) to assist in the finding of a seven-year old rape victim who disappeared shortly before she was to give evidence in the trial of her alleged attacker.  Yet the Commissioner of Police, a woman with no Police experience at the time she was given the job, declares that she is satisfied with the ‘progress’ being made by the SAPS!

It is possible to cite dozens more examples, but it is not necessary to do so, to realise that practically every aspect of management touched by the Government in South Africa is at least below the minimum standard necessary.  The question now arises what should be done about it?  A number of obvious answers come to any thinking person:

·         Select only people who are ‘fit and proper persons’ to senior positions, as is required of banks, insurance companies and other financial institutions, with attention to their actual (not only claimed) qualifications and experience.

·         Get rid of cadre deployment.  Race or political persuasion are not valid parameters for the selection of management in any context.  If a particular policy is to be implemented, that policy must be spelled out, and the management required to comply with it.  Unfortunately, that wold require that many unspoken policies are made public, but that is the responsibility of Government in any event.  Policies of Government bodies cannot be formulated behind closed doors to be implemented by stooges.  There were many well-qualified, broadly experienced and competent managers in South Africa, and many of them could be induced to return if it were to be made clear to them that their advancement through the ranks would be on the basis of performance.

·         Get rid of Black Empowerment.  South Africa cannot afford the huge cost, in financial terms as well as in terms of the loss of competent persons abroad and in the loss of competitive capability, of a policy that has reintroduced Apartheid in covert form.

·         Introduce standard methods of assessment of performance of top management, and discipline those who do not meet those standards.  If the failure to meet the required standards of performance is not corrected within a reasonable time, discharge those persons and appoint new and competent persons to those posts.  The Chairmanship of SABC, the Chief Executive position in Eskom, and the Chief Financial Officer post in SA Postal Service are not learnership positions!  These jobs are for people who can actually perform the important duties they require!

·         Make the size of the salaries and the payment of bonuses to top management dependent on performance in the achievement of objectives that are meaningful in economic and financial terms.

·         Set a rule that withholds any bonus on termination of employment if the overall performance of the intended recipient is not in accordance with pre-set targets.  Any forced termination should automatically negate any bonus entitlement unless specifically approved after the termination, for good cause.

 

SASSA and the Failure of Grant Payments

The South African Social Security Agency has achieved something noteworthy.  It has made payments of social grants early for the Christmas season, but then withdrawn those payments that were not collected earlier than usual, leaving 35 000 recipients destitute for the month.  Noting that the number of persons who would not receive their grants for December was “only 35 000” out of a total of 11 000 000, the spokesman for SASSA stated that, in his opinion, that was not a bad result!  He also pointed out that SASSA had notified grant recipients of the early payment date by advertisements in newspapers.

Perhaps it is time for a reality check.

The grant provides an absolute minimum amount of money for a single person to buy food for a month.  When the Minister of Finance smugly announced an increase in the grant amount by R50 per month in 2013, on the same day the price of a two litre bottle of milk increased at Pick n Pay by fifty-six cents.  Let us assume that a pensioner uses for litres of milk per week – probably an underestimate.  That means that the cost of milk alone increased on that day by R4-82 per month, representing an increase of 9,6% of the grant increase, for one item in the shopping basket!  And that assumes that the grant recipient is supporting just himself.  The hard truth is that the average grant recipient is supporting at least another two persons.

In order for our grant recipient to see the notification about the early payment of the grants, that recipient would have to buy at least one newspaper per week – say a cost of R25 per week, or R107 per month – another 7,4% of his grant!  And that assumes that the recipient is able to read, which is certainly not a given!

To impose a rule that the grant has to be collected within a certain number of days also fails to take into account the fact that many of the recipients have to walk for many kilometres to reach a point where they can make the withdrawal.  Many of these people make arrangements to reach the collection point using the goodwill of others, and those arrangements can often not be altered merely to suit the whim of an unthinking SASSA official.  The penalty for being too poor to own a car to collect the parlous amount that SASSA so generously pays is starvation for the month!  A brief visit to any of the State hospitals around the country will show queues of hundreds of people waiting for up to twelve hours to see a doctor.  Most of those will be grant recipients – they have to be desperate to submit themselves to the incompetence and arrogance of the State medical service!  Many of those recipients will be constrained by their state of health in the outings they make to the nearest ATM to check whether the payment of the grant has yet been made.  They rely on it being available to them at the normal time.  In many cases, illness prevents them being able to collect the grant at all for the duration of the illness.

The SASSA official stated that, if the recipient missed the December grant payment window, SASSA would make a food parcel available to them, with a warning that the value of that food parcel would be deducted from the amount of the grant paid to them in January!  Does that man live in the real world?  The grant is not enough to live on, so how would making an advance payment of next month’s grant amount help, other than to postpone starvation for a month?  Of course, getting the food parcel entails a trip to a SASSA office, usually a much more time consuming and costly exercise than a trip to an ATM, and a wait there for up to ten hours to see the official concerned.

The statement that “only 35 000” recipients would not receive payment of their grants tells any intelligent observer that SASSA is a heartless organisation, with no understanding of the plight of the people they are there to serve.  “Only 35 000” is a huge number of people!  One is reminded of the comment by the Eastern Cape MEC for Economic Development, that the rate of unemployment in the Eastern Cape is “only 69%!” and therefore did not warrant any particular effort to correct the problem!

One wonders how well the top officials would respond to having their December salaries withheld for a month, because they did not spot a particular announcement in a newspaper!  It might be an interesting exercise to withhold a randomly-selected 2% of SASSA salaries each month, to gain an insight into the effects of this rather arrogant rule. 

What hardship would it cause to SASSA or to the ANC Government to leave the uncollected grant payments in the accounts of the recipients for at least a month, or preferably six weeks after the payment is made, to allow for the very real difficulties experienced by the poverty-stricken recipients in collecting this money?

Perhaps even more interesting will be the response to the unfeeling actions of SASSA at the next election, when the large number of ANC-voting poor have the chance to express their anger.

Dewani and other Symptoms of Collapse

Many people are predicting a disaster for South Africa in the coming years, pointing to all of the problems confronting the country, and others, the optimists, are saying that things will be better.  The Australians have a saying, ‘she’ll be right, mate!’  That assumes that there is some sort of natural force that takes care of all the inadequacies and the stupidities of people.  Unfortunately, any realistic assessment of the condition of the country must come to a conclusion that the odds are not on our side. 

·         Eskom:  This organisation (if one could dare to apply that description to a group of arrogant, highly-paid officials all running in different directions) has demonstrated clearly that it lacks any capability to provide the essential electricity, on which practically every economic activity in the country is dependent.  When one assesses the state of economic or industrial development of a country, the usage of electricity is one of the prime indicators.  Eskom has failed to ensure that electricity is available, in adequate and reliable quantities, in consistent voltage, and reliably.  Its predictions of delivery of bulk electricity, from Medupi and Kusile, and from the large number of power stations left over from the bad old days of the Apartheid Government, most of which have become strongly in need of the maintenance that is an essential of any modern productive facility, are more often wrong than right.  Medupi is currently six years behind its original commissioning deadline (probably because the ability of those in charge of the decisions needed more time to optimize the payoffs to themselves!), and even a date set in November for first-stage commissioning in mid-December will be missed by at least a month!  It is hard to believe that a prediction by a Minister can be 100% wrong!  The CEO of Eskom stated unequivocally on Sunday that there would be no more load-shedding for the rest of December, only to have load-shedding again on Monday.  He appeared on television on Monday to assure the public that there would be no load-shedding, only to have the statement cut off mid-stream by load-shedding.  The CEO managed to get a prediction of two minutes into the future wrong!  The spokesman for Eskom subsequently admitted that the Open Cycle Gas Turbines had failed because someone in the organisation had forgotten to order the fuel on time!  Eskom manages to supply a fluctuating voltage for a large proportion of the short times that it actually delivers electricity, causing huge problems for voltage-sensitive equipment.  That, together with the continuing failure, as well as the planned (?) load-shedding has brought South Africa to an unprecedented low on the scale of desirable investment locations.  The worst of it is that one cannot gain any confidence in the predictions and promises made by Eskom executives or the relevant Ministers.  They have all shown clearly that they have no clue of how to manage a vital element of the economy.

·         South Africa Airways:  No-one is willing to believe the weighty statements made by the executives and the Minister that this symbol of national pride (?) will turn around soon, and no longer require support from the State’s coffers.  An annual demand for another R600 million to ‘support the turnaround plan’ has become routine, as have promises that this will be the last time.  There has been no turnaround!  The only change has been that the annual performance bonuses (?) have increased every year, new senior management has been appointed, to allow them to dip their snouts into the gravy without doing anything to improve the situation, and the losses have mounted.  The saving grace in this situation, is that the accounts of the State-owned body have not been completed or issued for three years!  While that has spared us the depression of reading a story of incompetence, it has induced in thinking taxpayers a suspicion of the reasons for the delay.  If SAA had been a Stock Exchange-listed company, even the powerless JSE might have been induced to delist its shares, the Revenue Services would have commenced criminal action against the company, and the shareholders would have fired the entire Board and demanded that the new Directors take immediate steps to appoint competent managers to return the company to profitability.  In Germany, the senior executives would be in jail for managing a business that is manifestly incapable of paying its debts.  SAA would, in any situation with capable and knowledgeable management of the country, have been closed dow or privatised at least ten years ago.

·         South African Police Services:  Stories abound of wrongful arrests being made by the Police, of awaiting-trial prisoners walking away from custody, of people languishing in prisons for years as a result of the Police failing to complete their investigations, of valuables, such as watches, being stolen from crime scenes under Police control (?), of suspected murderers being brought to trial to face woefully inadequate accusations and unsupported allegations, of gangs rampaging through the townships of Cape Town and Durban, undeterred by the presence of the Police, who know that these conditions exist, yet fail to provide adequate staffing at the local Police Stations, in numbers or in competence, of rape victims being ignored when they lay charges against the rapists or their files being ‘lost’, of Police brutality in beating or killing innocent people.  The Police in South Africa have earned the reputation of being one of the least competent forces of law and order in the civilized world, and there are no credible signs that there is any improvement on the horizon.

·         National Prosecuting Authority:  The withdrawal of the charge of murder against Shrien Dewani was hailed by a British journalist as evidence that the criminal system in South Africa is fair.  One may be pardoned for wondering how much that journalist was paid to make that statement.  A far more apt pronouncement would have been that the case should never have been brought to Court with the evidence at hand.  It demonstrated very clearly that there is a total lack of competence at the head of an important body.  That is no surprise, given the handling of the numerous criminal charges against Jacob Zuma.  The expenditure of many millions to date, including the R2 000 000 to fly the accused from Britain in a chartered aircraft, the huge legal cost of the lengthy extradition processes in Britain, the cost of two months evaluation in a mental facility, and the as-yet unknown amount of damages that Dewani will probably claim for his arrest, extradition and harassment over a period of four years to face a charge that, in the opinion of most (uninformed) members of the public should have been a walkover, should have been handed to our honourable State President as a contribution to the upgrade of his private home.  That would have brought less ridicule to the nation!

·         State President:  The State President’s handling of numerous matters have been the subject of intense criticism over many years, culminating in the Nkandla affair, which has showed conclusively that he is either a liar or a fool, and, in any event, that he has no ability to manage the affairs of the nation, entrusted to him by the voters.  He has excused the lack of performance of his Government over the years, claiming that the demonstrated failings were the fault of the ‘previous Administration’, completely ignoring that he was the head of that previous administration, and that his Party has constituted the totality of those ‘previous Administrations’ for the past two decades.  His most recent tactic against the flood of criticism and allegations has been simply to disappear from the scene, visiting Russia and China and Australia, making weighty promises to the Party faithful at rallies and ceremonies, where he does not have to face his critics and detractors, but always carefully avoiding any answers to the voters and their representatives, the people who are entitled to know, because they pay his salaries and expenses.  It is perhaps amusing to note that, after a speech in which he urged the people to cut unnecessary expenditure, he flew to his home at Nkandla (the improvement of which at a cost of R245 000 000 he professed not to have noticed!) at a cost of R320 000!

·         Departments of Education:  The continuing underperformance of these vital elements of a modern economy has become routine.  More money is spent every year for less result.  Tens of thousands of children are being sent out into the world with an education that is, to say the least, inferior.  They are being handed Matriculation Certificates that have the value, at best, that they attended (possibly only some of the time!) school for at least twelve years.  Employers know that the Matric has very little value, with many of the bearers being close to illiterate and probably innumerate.  It has no value in the wider world, and the degrees that are based on them have been so degraded in the eyes of the civilized world as to have little value greater than a joke.  The only plausible explanations for the acceptance by the Government of this state of affairs are that those managing (?) the country do not know any better, or that there is a conscious attempt to dumb down the voter base, to ensure a continuing supply of unknowing voters to support the ruling Party.

·         South African Broadcasting Service:  It comes as no surprise that the Chair of the Board and the CEO do not have the qualifications they claimed and stated unequivocally to possess.  After all, anyone who has attempted to enter into a correspondence with the SABC will know that there is no-one in that building who is able to read or write!  How else does one explain that an attempt to cancel a TV licence that has carried on for ten years after the first notification of cancellation has been given, without any response from the SABC, other than computer-generated accounts showing amounts of over five thousand Rands, or computer-generated threatening letters from their collection agents?  The fact that they could have been given their jobs without their qualifications being checked appears to indicate the same absolute lack of management capability of those in control (?).  If the same situation had occurred in a bank or an insurance company, heads would roll.  They are required by law to have only ‘fit and proper’ persons in responsible positions!  In Government-owned bodies, and in Government itself, it does not seem to be a requirement that ‘fit and proper persons’ are in control! 

·         Civil Service:  No-one who has ever written to any Government body could expect that a result will ensue, unless the request is written on the back of a large cheque payable to Bearer!  The telephone is almost never answered, and, when it is, the person answering has virtually any ability to provide the information requested.  Any communication with a more senior person is shunted from desk to desk, leading to the quest being abandoned in despair.  The people at the bottom of the organization show no interest or desire to assist, and those at the top are adept in the skill of delay, unless, of course, there is a benefit offered to them or the company which will facilitate the matter, owned by their wives!

In summary, any reasoned evaluation of the management capability of South Africa Inc. must come to the conclusion that it does not exist.  The result of this can easily be forecast.  South Africa will continue to decline, in world rankings for virtually everything that makes living in the country a good experience, in its attractiveness as an investment destination, in its ability to produce a new generation of leaders who understand what is required to make a country work, in the honesty or competence of its Government and the bodies of Government.