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Apart from luck, Finance Minister Malusi Gigaba would need to dump his Mr Nice Guy image and prepare for a bare-knuckles fight, explains John Dludlu.
MALUSI Gigaba, the finance minister, is a warm, affable, generally pleasant and lucky man. Judging by his 14-point plan, he appears to be readying himself for one of the most bruising battles his career has ever, witnessed with vested interests, especially labour and business elements, within civil society.
Hidden in the section dealing with the ailing state-owned enterprises (SOEs) is a plan by Gigaba to identify non-core assets for disposal and to enable the private sector to participate in areas hitherto dominated by the public sector.
The minister has set himself March 2018 as the date to conduct a detailed audit of non-strategic assets of SOEs aimed at strengthening SOE balance sheets and producing a framework for the disposal of non-core assets.
Simultaneously, by now, in terms of his plan, Gigaba ought to have commenced consultations with his cabinet colleagues on the private sector participation (PSP) framework. The PSPs are government-speak for a bid to partner with the private sector on areas that are traditionally the domain of the private sector such as rail freight, airports and general economic infrastructure.
His work includes elaborating broader guidance on sectors or asset classes for PSP and deciding whether sector specific PSP frameworks are needed. This work, including presenting potential projects for PSP to line departments, a technical task team and an Inter-Ministerial Committee, should culminate next March with the implementation of the framework.
On the face of it, these two interrelated projects – disposing of non-core assets and partnering with the private sector – sound sensible and straightforward, and they are long overdue. In an economy stuck in a recession, they should be no-brainers.
However, getting them off the ground will be Gigaba’s toughest test. The technical process he outlined in the 14-point plan is sound, and perhaps a tad too ambitious. This is understandable given the pressure that he is under to get South Africa back on a growth path.
The challenges he faces, though, are not technical. They are political. The disposal of non-core assets and PSPs are controversial subjects. During Thabo Mbeki’s tenure as president, he attempted both with mixed results.
At Transnet, for example, labour unions fiercely resisted plans to hive off portions or entities to the private sector. Only those entities, which were deemed non-core and transferred to other state-entities or departments (like Metrorail, Shosholoza Meyl, SAA and SA Express), went off without a fight. A strike was called to protest the restructuring process, especially planned outright sales to the private sector, in the mid-2000s. This was resolved, in part, through a light co-determination model agreed with labour which oversaw the execution of the plan.
The problem with selling off non-core assets is that inevitably these tend to be loss-making dogs, which have suffered years of mismanagement. Faced with such, buyers often resort to measures such as cost cutting, including reducing headcount, to improve efficiencies and, in the process, provoking the wrath of labour unions. In the ideal world, government would fix them before putting them up for sale.
It would be curious to see what Gigaba’s list looks like. From the look of things, there are no plans to include loss-makers, SAA and SA Express, onto this list of non-core assets. Instead, moves are afoot to recapitalise SAA. After all, it wouldn’t make sense to inject billions into SAA and SA Express only to then sell them. Perhaps, he has set his sights on liquidating the listed stakes owned by the government through entities such as the Industrial Development Corporation.
Assuming that he chooses to be bold, and goes for the jugular and places certain companies up for outright sale, he will have to convince labour, which has been bruised by retrenchments, to buy into his plan. This won’t be easy. Even in its current divided state, labour is likely to put up a fierce fight, and the SA Federation of Trade Unions, which is led by Zwelinzima Vavi, will find this a worthy cause to fight. This would be a typical battle to fight than trying to oust President Jacob Zuma.
Of course, the other hurdle is the outcome of ANC succession politics in December and the implications thereof for the party’s electoral fortunes in 2019. Faced with declining support, the ANC factions are unlikely to alienate the electorate by selling off assets, which might worsen unemployment ahead of an election year.
As for the PSPs, Gigaba might be on the money. But he needs tough and shrewd negotiators on his side to wring out important concessions. There are plenty of opportunities. Most of the lucrative opportunities are not in SA. And so far, business has shown lack of imagination by focusing solely on the so-called low-hanging fruit such as partnering on port and rail operations without wanting to invest in the infrastructure. So, a company like Transnet or Airports Company of SA would have to carry the cost of constructing, expanding and maintaining infrastructure, whilst business participates on the upside through an operations management contract.
An enlightened approach would be to share both risks and rewards equally here, and partner on the same basis across the continent and abroad. In other words, there should be no cherry picking.
Here again, the results to date are mixed. For example, we have yet to see what, if at all, the Development Bank of Southern Africa has to show for its international arm. Quietly, though, Transnet has been working on an ambitious international strategy.
At Eskom, management and the board have put a stiff resistance for partnering with independent power producers (IPPs). In fact, word on the ground suggests that the animosity between the National Treasury and Eskom has much to do with Eskom’s reluctance to partner with the IPPs. IPPs would be part-funded by the DBSA, which reports to the Treasury.
The final hurdle Gigaba faces is ensuring his colleagues, like Lynne Brown (public enterprises) and Mamoloko Kubayi (energy), support his PSP initiative. Brown, who has been dented by the #GuptaLeaks and the Molefe saga, is weak, and Kubayi has yet to prove herself.
Apart from luck, Gigaba would need to dump his Mr Nice Guy image and prepare for a bare-knuckles fight. His chances of success would be enhanced if Cyril Ramaphosa, the deputy president, wins the ANC succession race in December. Of all the candidates, he is by far the only one who understands the economy and, if Zuma makes way next January, Gigaba will find Ramaphosa a crucial partner in the economic restructuring programme.
* John Dludlu is the founder of Orwell Advisory Services and is the former Sowetan editor.
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