Fixing the twin icons of crisis bedevilling the country

Derby and De Ruyter are out, but that doesn’t mean the issues around Transnet and Eskom will be any easier to resolve.
Transnet’s head office in downtown Joburg takes on a special glow thanks to high emissions of particulate matter courtesy of Eskom, the country’s biggest polluter. Image: Bloomberg

Portia Derby has finally resigned as the Group CEO of Transnet – but the problems remain unresolved.

For the better part of the past three years, Derby and former Eskom CEO André de Ruyter have presided over the two most important entities in the state enterprises portfolio.

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Read: Transnet boss Portia Derby resigns

Eskom and Transnet – defined by large balance sheets, larger debt burdens and structural problems that pre-dated the arrival of both CEOs – have come to represent the sum of South Africa’s historical, current and future problems.

In their original iterations, Eskom and Transnet were purpose-built to give life to the country’s logistics and energy systems, which in turn serve as the conduits for economic activity.

The state-ownership model gave the politicians a unique opportunity to use the organisations to ensure that the preferred policy of the government of the day could be supported through these entities.

Given the fractured nature of access and participation in the country’s economic system, the state’s role in guiding what these entities did played an instrumental role in ensuring that historic patterns of exclusion could largely be addressed. Eskom’s mission of mass electrification of the country since 1994 serves as an example of this mission.

Derby and De Ruyter, and Gordhan

When Derby and De Ruyter were appointed, the sense of goodwill that accompanied their appointments was heavily influenced by the desperate need to find some leadership stability after years of governance chaos at both institutions.

The years of chaos and deployment practices had systematically decimated the field of those willing to put up their hands, and Derby and De Ruyter were seen as brave enough to try.

Questions about their actual core expertise in the logistics and energy fields were brushed off in the hope that they would at least be supported by properly-skilled technocrats with more intimate insights into the complexities of Eskom and Transnet

Eskom, Andre De Ruyter,

André de Ruyter’s replacement ‘cannot afford to be politically naïve’, says the author. Image: Bloomberg

What also united them was the fact that both entities report to the Department of Public Enterprises, where Minister Pravin Gordhan has had to juggle multiple entities that suffered from escalating levels of chaos and crisis moments.

The political guillotine did not spare even Derby, whose experience of the political trenches ‘was far more established’ than De Ruyter’s. Image: Bloomberg

His approach to managing the portfolio has itself not been remarkably glorious, and this meant that rather than the focus being on the operational and management issues, there were far too many sideshows regarding the role and influence of the shareholder representative in the toxic mix of governance and management.

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In recent years, Eskom and Transnet have had to contend with shifts in their industries that have required some level of agility and adaptability in leadership.

Complexities …

Eskom’s reliance on coal as the basis for its all-important baseload means it has had to contend with the evolving perceptions around the use of fossil fuels and the country’s own habit of adopting international benchmarks.

This has created tensions between the need to maintain energy security and the commitment to adapt. Core to the problem is the reality that South Africa’s transition journey comes at a time when it has been faced with an energy deficit crisis that dates back to 2008. This makes the idea of abandoning fossil fuels in favour of renewable alternatives in the middle of a crisis difficult to sell – especially to key constituencies in the political and social establishment.

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The lack of clarity about what the balance between transitioning out of fossil fuels and not decimating an already fragile energy profile should be means some citizens have no idea what the national approach to these contentious issues actually is.

Transnet’s role as the nucleus of the country’s logistics network has been challenged by the increasing use of alternative transportation channels that, ironically, have been spurred into life by Transnet’s own internal limitations.

Problems with corruption-tainted contracts and poor security of infrastructure have led to Transnet operating as a shadow of itself far below its capacity levels.

… upon complexity

At the same time, both Eskom and Transnet have found the debt burdens on their balance sheets so onerous they are unable to raise capital affordably and rely on the state stepping in to help them retain some level of access to the credit markets.

Tackling these problems decisively eventually eluded both Derby and De Ruyter – and as the search for their successors carries on, both companies have to address difficult questions about the type of leaders they need to take the helm.

A fundamental problem across both entities is that core technical issues that affect performance have now become as complicated as the business management issues that have to be addressed in order to fix the balance sheets.

The regulatory rules around procurement, which has been cited by both organisation as limiting and self-defeating, also remain an unresolved point of deliberation.

Simultaneously, the lingering hangover of widespread corruption across the organisations requires a leader with the courage to acknowledge and then confront the issue.

‘The shareholder’

If all of that was not complicated enough, the omnipresence of the minister of public enterprises as the shareholder – whose approach to governance leaves much to be desired – means that whoever wishes to tackle this mission cannot afford to be as politically naïve as De Ruyter was.

The political guillotine did not spare even Derby, whose experience of the political trenches was far more established than De Ruyter’s.

When Gordhan announced that he had instructed the reconstituted board to assess the capacity of the Transnet executive team in the aftermath of yet another set of dire results, he was penning the last rites on Derby’s troubled term at the company.

Quite exactly why Derby took a few more weeks before eventually folding is as abiding a mystery as the question of whether anyone actually has the range of skills, competencies and courage to take on the impossible job of running Eskom or Transnet.

While the boards remain committed to the cause of fixing these twin icons of instability, one wonders if even their best intentions can ever be sufficient to find the candidates with a remarkable mix of skills and competencies that just happens to meet Gordhan’s expectations – which only he seems to actually understand.

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To blame the rot at SOEs on the CEOs and management teams, rather than on the central-planning Luthuli House, is like blaming the children of the alcoholic father for the deprivation in the household.

The success of the National Democratic Revolution equals the bankruptcy of SOEs and the looming bankruptcy of the failed state.

This is exactly what ANC supporters voted for. Who are we to try and mitigate this orchestrated disaster?

These votas getting exactly what they voted for !!!
No pity for their “suffering” whatsoever !!!!They wanted it – better enjoy it fools.

Love the comment Sensei.

With regards to : “This is exactly what ANC supporters voted for.”

The sad reality is that the voters will not realize that their votes is causing all this chaos. They are voting in the incompetent ANC party. It will be easy and crucial for the ANC to falsely convince the voters that it is still the specific minorities fault (Apartheid) and that land expropriation without compensation and rasist BEE policies is the way out. Which in return will only create more chaos and further decline this beautiful country.

It is crucial that the masses focus on “race” and not at how incompetent the party actually is. This is how the ANC get the votes.

The voters do get exactly what they vote for, it is just sad that the majority don’t know it.

The most practical steps we can take are to promote education and actively engage in educating people. Additionally, we must ensure that everyone within our wider networks participates in the upcoming elections next year, making this an absolute priority.

Eskom and Transnet are not corner shops requiring entrepreneurial knowledge, hard work and skill to succeed. Indeed, the skills needed to turn around these organisations (they are not businesses, as the CEO has not got the full backing of the owners) cannot be drawn from the private sector. Any leader worth their salt would not accept such a poison chalice, where you do not have the backing of the owners to do what is needed. The political bosses will hinder you at every turn.
The only future for electricity, transport and distribution in South Africa lies out of the reach of politicians; they must be privatised to succeed. Tying the hands of talented leaders does not work. Freeing these despotic organisations from political interference is the only solution. Investors need comfort delivered by excellence, not being dominated by political corruption.
Turning a business around is challenging; the authoritarian leader can do it, but not in an entity that is rotten and designed to remain so…

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