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  • Writer's pictureAndile Khumalo

'Babysitter' Threat to Black Talent

Updated: Apr 29, 2019

Between the Book of Zechariah, Charles Dickens and the Aloe Ferox, we ended up with a budget speech full of parables, quotations and anecdotes but little on how we are going to get this economy back to where it needs to be.

Like most people, I watched the speech with a tense feeling of expectation. After all, finance minister Tito Mboweni was under pressure to find more revenue, cut more operating costs, reduce the budget deficit and fix Eskom.

He did, however, manage to come up with a way to cut some costs, although that depends on whether public servants will take his early retirement offer. He failed at getting any real additional income other than the bracket-creep income he will earn - which he only mentioned in passing in his speech.

But the most important take-out from the budget speech was always going to be how we deal with Eskom. It is the single biggest threat to our economic recovery, and one that had to be addressed decisively.

Mboweni did well to commit real funds to the utility. However, I wonder how much thought has gone into the requirement of the chief reorganisation officer.

"The fiscal support is conditional on an independent chief reorganisation officer (CRO) being jointly appointed by the ministers of finance and public enterprises with the explicit mandate of delivering on the recommendations of the presidential task team," said Mboweni as he announced the R23bn a year package for Eskom.

The governance framework of state-owned entities (SOEs) has a shareholder representative, being the department that a specific SOE is allocated to. The next layer is a board of that SOE, along with its chairperson, which is appointed by the minister of the shareholder representative, and is then taken to the cabinet for final approval.

The board is then responsible for the appointment of the CEO, which also requires approval from the minister of the shareholder representative.

The CEO will then be responsible for leading the executive team while also reporting to the board.

The board, on behalf of the SOE, also enters into a performance contract with the shareholder representative. It's called a shareholder compact. This document consists of a list of key performance indicators that often cascade to the CEO and the rest of the executive management team.

So I'm a little confused.

The government already appoints everyone who is responsible for every SOE. From the board, to the chairperson, to the CEO - all are appointed by the ministers and even the cabinet.

So why do we now need this chief reorganisation officer? How does he or she fit into the governance framework of the SOE? Who do they report to? The CEO? The board? The shareholder representative? The presidential task team?

I look at a CEO like Vuyana Jarana at SAA. The man's impeccable record as CEO of Vodacom Business is well known in the telecommunications industry. Why he even took the job at SAA is a mystery to many. Nevertheless, he clearly wanted to serve.

Mboweni was unequivocal in his speech: "If a state-owned enterprise applies for a government guarantee for operational purposes, it will be required to appoint a CRO in concurrence with the National Treasury and its bondholders."

It is common cause that SAA will apply for more government guarantees.

This means that Jarana will now inherit a babysitter whose job will essentially be to police him and his executives and report directly to the government and the lenders - and in the process undermine the role of the CEO and the board, who are all appointed by the very same ministers and their colleagues.

Either the banks and bondholders have shoved this CRO requirement down the throats of government, as a key term of their continuous lending, or government no longer has confidence in its own SOE appointees.

I have on many occasions heard fellow black professionals refer to executive and non-executive roles in SOEs as a poisoned chalice and then proceed to discourage each other from taking on these roles.

If we genuinely want to turn around the fortunes of our SOEs, we must appoint and retain top black talent and be careful not to create an environment that undermines them and their efforts - no matter how well intentioned such interventions might be.

This article first appeared in The Business Times, Sunday Times on Sunday 24 February 2019.

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