The future of SOEs

ANTHONY BUTLER: If only Telkom rebound could pave way for ailing SOEs

First published in Business Day

28 JANUARY 2022

The career of former Telkom CEO Sipho Maseko, who stepped down at the end of last year after nine successful years at the helm, raises interesting questions about the future of our state-owned enterprises (SOEs).

Maseko’s leadership has been presented as a model to be followed. But does it really offer a guide to a better future?

In the early 2000s Sizwe Nxasana led Telkom to profitability and a partial listing on the stock exchange. It then fell on difficult times, with one failing CEO after another. The company’s bloated staff complement, exploitation of its monopoly position and technological backwardness all marked it out as a typical SOE.

Maseko joined Telkom in 2013 alongside incoming chair the late Jabu Mabuza. A turnaround strategy was drawn up and implemented. The company caught up with its rivals in mobile telephony, information technology and fibre. A smooth transition plan means these advances will continue into the future. Or so we hope.

Can the Telkom rejuvenation experience be repeated now that President Cyril Ramaphosa’s new dawn has broken? Most SOEs still veer from one crisis to another, raising the costs of basic goods and services to the detriment of citizens. They destroy small businesses, obstruct infrastructure investment and threaten the fiscus.

One fear must be that Telkom’s recent past may simply be an aberration. The broad alignment between Mabuza and Maseko was crucial in providing the CEO space to develop and then implement a turnaround strategy. They enjoyed considerable insulation from political interference because the state was merely a minority shareholder. Telkom did not have to traverse the regulatory labyrinth that makes investment so complex for fully state-owned entities.

We have seen a reshuffling of utility boards and CEOs since Ramaphosa became president in February 2018, but little progress with structural reforms. Impediments include the role of parastatal supply chains in formal and informal political funding; the power of “privatisation” resistant trade unions; and an ideological predisposition towards state-driven development.

These forces are bound together and operationalised by the ANC’s continued interference in the appointment of senior executives and board members.

The recent trajectory of the SA Post Office (Sapo) suggests a quite different vision for the future to Telkom. Sapo had also become a technological laggard, gradually losing its core revenue stream of mail delivery. Banker Mark Barnes was appointed CEO in 2015, and launched a fresh strategy to exploit Sapo’s huge client base and physical infrastructure, deliver social security grants and offer financial services to the poorest South Africans.

Like Maseko, Barnes enjoyed the broad support of his board, and the parastatal was recapitalised by the state to enable its rejuvenation. However, he resigned a little more than two years ago as a result of a disagreement about the full integration of Postbank and Sapo. At the time he claimed Sapo had “turned a corner”, and insisted his comprehensive overhaul of the executive team had put in place a firm foundation for continued success.

But it wasn’t long before a familiar litany of problems recurred: dubious suspensions of senior executives, repeated acting appointments to key positions and collapsing operations.

The relentless decline of SA’s major transport, logistics and defence parastatals has been depressing. More disheartening still, however, are the SOEs that have undergone complex, painful and costly restructuring exercises and begun to operate as orthodox enterprises: Telkom and Sapo, but also SAA and the SABC.

With no change in the underlying approach of the ANC to deployment, and no intellectual shift with regard to the role of the state, the experience of Sapo, rather than that of Telkom, may be our best guide to the future of our SOE sector. And that, I am afraid, includes Eskom.

• Butler teaches public policy at the University of Cape Town.

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