Ramaphoria vs. Ramareality - and the hard truth about SOE bailouts | Fin24
 
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Ramaphoria vs. Ramareality - and the hard truth about SOE bailouts

Jul 16 2019 07:00
Adam Craker

When President Cyril Ramaphosa delivered his maiden State of the Nation address, he made it clear that the government could no longer afford to bail out inefficient and loss-making state-owned enterprises.

Yet in his first SONA as South Africa’s fifth democratically elected president, he did an almost complete about-turn when he announced that the government would urgently table a Special Appropriation Bill in order to bring forward a portion of the R230bn already allocated to Eskom over the next ten years. In other words – a bailout.

As easy as it is to dismiss this decision as irresponsible or even reckless, it would be equally foolish to assume that a new president could so quickly root out more than a decade of political interference and influence in key state processes and institutions.

The gross financial mismanagement and corruption surrounding Eskom in particular is without question one of the greatest contributors to the financial and economic predicament that our economy faces.

Equally, ongoing financial, operational and governance issues experienced in other SOEs such as Transnet and SAA have placed additional unnecessary pressure on the fiscus and impacted on the performance of the economy.

Unfortunately, each of these entities have all also played a crucial role in a widespread system of patronage in SA politics.

If Ramaphosa wants to dismantle this highly inefficient and damaging system of patronage in South African politics and significantly reduce corruption, he needs to bring about genuine and lasting reform in key regulatory and administrative institutions. Achieving this will take time.

Wanted: political will

As we can see only too plainly in the recent appointment of many former Zuma-linked individuals as heads of parliamentary portfolio committees, it will take a lot more than strong intent to remove the ghosts of the former president from the halls of Parliament.

Similarly, recent allegations that the Public Prosecutor Busisiwe Mkhwebane is investigating Ramaphosa for alleged money laundering and her ongoing and seemingly baseless pursuit of public enterprises minister Pravin Gordan’s relationship with the so-called rogue unit at the SA Revenue Service suggest that there is a great deal at stake for those on the wrong side of the former president.

For this reason, Ramaphosa has to tread carefully if he is to set in place a system of radical institutional reform without triggering an internal political crisis that he may not survive.

One of the first steps towards this was the signing into law of the Public Audit Amendment Bill in November last year. The bill will go a long way towards supporting reform and accountability in SOEs and other government departments by allowing the auditor-general’s office to directly sanction state entities and government departments when they flout the Public Finance Management Act.

It even goes so far as to make provisions that accounting officers and those implicated in wrongdoing personally liable for the costs resulting from their mismanagement. It is because of the Auditor-General Kimi Makwetu’s persistence in driving this tough new legislation that I have hope for ailing public departments and SOEs.

Another step towards laying the foundation for increased accountability and sustained institutional reform was the appointment of Shamila Batohi as the head of the National Prosecuting Authority. As much as we are aware of how financial mismanagement and corruption costs our economy, the real injustice lies in the lack of accountability to those responsible for it and the ultimate consequences that we all have to bear.

Although it could be argued that Batohi must still act against some of the biggest culprits, she has to be sure that there is absolutely no room for those implicated to manoeuvre when she does.

Other key processes that go hand-in-hand and require a substantial overhaul are public service recruitment and state procurement. Although state procurement has been a key site for corrupt activities, at this time it may be prudent for the president to loosen restrictive procurement processes in favour of accelerating implementation.

The trade-off is that when the process fails – contracts are broken or irregularities are exposed - the consequences are immediate and enforced. The same applies to professionalising the public sector; various failures within the existing process of appointing senior government officials has resulted in the separation between political and administrative roles being blurred.

This has in many cases had a direct and negative effect on internal and external attempts at cracking down on corruption in the civil service.

The uncomfortable truth is that Ramaphoria has worn off and given way to Ramareality. As the fallout from the most recent bailout announcement for Eskom has shown, this will be tough-going both economically and politically, so we don't have a moment to lose. 

In order to restore confidence in his ability to bring about the necessary social, economic and political progress, President Ramaphosa should set realistic targets and make sure that he meets them.

Even if he were to align his term in office to a simple GDP growth objective of 1% in year 1 and 2% in year 2 - as long as the growth trajectory and the necessary social progress continued, we would continue to support him.

Craker is the CEO of IQbusiness,  a B Corporation and the 2018 winner of the Conscious Companies Awards. Views expressed are his own.

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