Leave public enterprises alone

2009-11-18 00:00

THE recent upset surrounding the exit of the Eskom CEO, as well as the crises in several other public facilities including the SABC, SAA and Armscor, has placed the issue of their independence at centre stage.

As state-owned enterprises, how independent should they be? Around the world government involvement in the economic affairs of a country has been done through the regulation of public enterprises and their services or through state ownership of the enterprise. Public enterprises are common in utilities, transportation, communication, agriculture, natural resources and large-scale manufacturing. These are all productive sectors of the economy. Governments normally justify their involvement on the basis of state security considerations and economic development objectives.

Public enterprises play a crucial role in a developmental state such as South Africa and they should be managed strategically. For purposes of efficiency, the effectiveness, productivity and competitiveness of these public enterprises, competent and qualified strategic executive leadership is critical. This category of leadership should be politically neutral. Merit and ability should be the guiding principles in the appointment of leadership in public enterprises in South Africa and not political patronage or tribal relations. For purposes of quality service delivery public enterprises must remain neutral because they service a broader population, not just a tiny political elite or clique.

In some Third World countries political interference precipitated acute and profound systemic corruption and nepotism that culminated in the collapse of these public enterprises. Since South Africa is a developmental state it is critical to guarantee the autonomy of public enterprises so that they can fullfil their long-term developmental objectives without any form of political interference.

The boards of these public enterprises and their CEOs should be appointed along private-sector lines. This ensures neutrality of these executives in the running of these productive sectors of the economy. Good corporate governance practices should be followed to avoid poor performance. The state can still realise its economic development goals without directly interfering with the operational processes of the parastatals through regulation and its parliamentary oversight role which ensure accountability.

In most countries in the post-colonial era, public enterprises have been run along political lines and they collapsed because they became overstaffed and financially unsustainable. They incurred huge debt and received large subsidies from the government. Most of these governments got IMF-World Bank funding to boost them operationally and financially, but all those endeavours came to naught because of political interference by ruling political parties in the form of influencing procurement processes and the appointment of executives.

It is important to note that political parties may not necessarily have an active database of competent and qualified executives who are neutral unless they make an effort to do so. Thus it is important to resort to global best practice, that is, to use private sector approaches to recruitment and selection of these executives because it is the objective way of acquiring neutral executives.

• Nyawo Gumede is a public policy expert based in Bloemfontein.

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