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.