Does a Management Vacuum Hobble South Africa’s State-Owned Companies?

Published in Bloomberg, Aug 13, 2015

Rudderless and cash-strapped. Inadequate, Unstable is the assertion.

“To a large extent the ability of South African industries to compete globally is influenced by the effectiveness of our SOEs,” Mark Cutifani, the CEO of Anglo American Plc, said in a July 30 speech in Johannesburg.

“We are being constrained by expensive, yet inadequate and unstable electricity supply and by capacity limitations on state-run rail links.”

While a panel appointed by President Jacob Zuma in 2010 to review their performance recommended a strategy overhaul, new rules for appointing board members and a clearer funding approach for state companies, the government took no immediate action and the management oversight of several of them has deteriorated.

SAA, which last made a profit five years ago and is surviving on government guarantees, has had five CEOs in the past three years. Eskom, battling to plug a 191-billion rand funding gap, has had six CEOs in a decade. Its last permanent leader was replaced in March after six months in the job, while the chairman resigned two weeks later.

Governance Failure

Keeping the companies under state control has given the ruling African National Congress a greater influence over the economy and the appointment of key personnel. The management flux is “a huge governance failure,” Lumkile Mondi, an economics lecturer at Johannesburg’s University of Witwatersrand who served on the state review panel, said.

Transnet may be the exception provided it can adapt in these troubled times.

Are the above assertions true or false?  What do you think?

To read the entire article, go to http://bloom.bg/1J3ezpJ

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