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Leadership void and losses plague these state companies

Mar 24 2017 07:05
Mike Hill, Bloomberg

Cape Town - Key state companies and agencies that play a pivotal role in driving the South African economy and distributing essential services are in disarray, as a high turnover of senior management hobbles their ability to take decisions and massive losses threaten their financial viability.

The “perilous financial state” of some of the companies may require government bailouts, BMI Research, a unit of Fitch Ratings, said in a report. We “continue to see the severely weakened financial condition of state-owned enterprises as a significant risk to the country’s fiscal health,” it said.

These are some of the worst-affected institutions:

1. Eskom

The utility, which provides about 90% of South Africa’s power, is struggling to match supply and demand. Eskom last year stalled the sign-off of government-brokered deals to buy green power from independent producers, which were contracted to develop plants after shortages resulted in electricity cuts from 2008, saying it had spare capacity of its own. When the government directed Eskom to conclude the accords, the utility said it would close several old coal-fired plants and terminate agreements with 48 coal-transport companies - an announcement that spurred truck drivers to blockade roads in the capital, Pretoria.

An investigation, which was halted by the company, showed some suppliers were favoured despite higher costs. Eskom has had an acting chief executive officer since November when Brian Molefe resigned after being implicated in the public protector’s report, State of Capture.

2. South African Airways (SAA)

The state carrier expects its annual loss to widen to R3.5bn in the year through March 30. SAA, which last turned a profit in fiscal 2011, has been surviving on government guarantees and doesn’t expect to make a profit until 2021. The airline, which is being run on a temporary basis by the head of its technical unit, is recruiting a new CEO who will be its seventh acting or permanent head in as many years.

3. The South African Social Security Agency (Sassa)

The state welfare agency has been at the heart of a controversy that’s threatened to interrupt the payment of welfare grants to more than 17 million people. While the Constitutional Court ruled three years ago that a contract Sassa issued to Net1 to distribute the grants was invalid because tender rules weren’t followed, the agency failed to appoint a replacement and couldn’t take on the job itself. On March 17, the court castigated Sassa and said Net 1 should continue distributing the monthly stipends for another year to give the agency time to get its house in order.

4. PetroSA

The state oil and gas company lost R14.6bn in the year through March 2015, mainly because of a writedown on its offshore Ikhwezi natural gas project, and a further R1.1bn impairment is anticipated this financial year. PetroSA sees no let-up in its challenges for at least the next three years. The company last had a permanent chief executive officer in 2015.

5. The Passenger Rail Agency of South Africa (Prasa)

The commuter rail service has lurched from one management crisis to the next. Its CEO, Lucky Montana, was fired in 2015 after a clash with the board, which accused management of concluding a number of irregular contracts worth billions of rand and asked the High Court to annul them. Acting CEO Collins Letsoalo was fired last month, following media reports that he gave himself a 350% salary increase. Transport Minister Dipuo Peters fired the entire board on March 3, saying it had failed to exercise adequate oversight.

6. The South African Broadcasting Corporation (SABC)

The state broadcaster’s entire board quit last year after parliament instituted an inquiry into its conduct following a series of scandals, management blunders and legal disputes. An internal report shows the entity risks running out of cash. The SABC hasn’t had a permanent chief executive since 2015. The public protector found that the former chief operating officer, Hlaudi Motsoeneng, lied about his qualifications and the High Court barred him from working at the broadcaster.

sassa  |  saa  |  prasa  |  petrosa  |  eskom  |  sabc


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