MAKHUDU SEFARA | Pitfalls of privatisation: is the entity the problem, or its leaders?

We should not always think that when an entity fails in its task of providing a service or performing a function, there must be a problem with the structure itself. Sometimes the problem is the user, not the agency.

The debate about how best to fight corruption — specifically, if the police can tackle corruption without the assistance of external structures such as the Investigative Directorate Against Corruption — is an example. Why create additional structures, rather than simply fixing the existing one? Why is fighting corruption additional to requirements for SAPS, when it should be its raison d’etre?

SAA was almost gifted an equity partner but pretended it did not need one because it had financially recovered. Now it seems the books were cooked. Or are still being cooked. Who releases a media statement about a great financial turnaround without providing the actual financial statements? Even Ditsobotla municipality, one of the worst in the land, doesn’t do that.

Now we hear SAA is on its second acting CEO in six months and the board has the unenviable task of looking for an “acting” CEO to replace the suspended “acting” CEO. The nomenclature internally must be changing to ensure the airline doesn’t get confused in its reports as to who is the acting chief and who is the suspended acting one.

For all of us, the question is: for how long are our taxes going to prop up a directionless airline? When SAA was said to be on the path to recovery early last year, what exactly did this mean, because we are now back in familiar territory. Are the SAA structures OK, or is the problem a weak CEO? Sorry, a weak suspended-acting CEO. It’s a mess.

Is it the people running local government who are wrecking a system that simply needs better leaders?

Eskom, meanwhile, is navigating similar treacherous territory. Just as South Africans are celebrating the apparent demise of load-shedding, the political and administrative leadership seem to be at each other’s throats on the structure of the utility. The framing is troubling.

Those internally who are raising issues, possibly motivated by an honest desire to ensure Eskom does not return to the bad old days of André de Ruyter, are labelled. The bona fides of reformists, mostly led by the Presidency, are needlessly questioned by political hacks good at wrecking and clueless at rebuilding anything.

President Cyril Ramaphosa, to assert his heart is in the right place, felt moved to reassure the nation. “We will undertake this restructuring carefully and responsibly. We will safeguard the financial sustainability of Eskom. We will protect energy security.” Decoded, he is saying: “Trust us to change the structure without messing up the country’s security of energy supply.”

The DA, too, tells us that the solution to municipal dysfunction lies in partnerships with private firms. The issue, again, is whether the structures and systems undergirding municipal service provision are inherently bad and therefore must be replaced, in this case with private firms. Or whether it is the people running local government who are wrecking a system that simply needs better leaders.

Politicians are driven by how to get re-elected, and not necessarily by doing what is in the interests of society. Self-interest rules. The private sector, too, is not always the solution. Its insatiable desire for profit is its Achilles heel.

Around the world, we are not short of examples of governments that privatised services and lived to rue the day. Take the UK’s rail network, which was renationalised under Great British Railways after fares predictably shot up, profit maximisation led to safety failures and the private operator faced bankruptcy.

Before we rush to embrace private capital or simply swap one structure for another, we must carefully scrutinise the underlying assumptions

In Hamburg, Germany, energy companies E.ON and Vattenfall had control of the city’s electricity, gas and heating distribution networks. They resisted pivoting toward environmentally friendly sources. In 2013, a popular revolt, “Unser Hamburg, Unser Netz [Our Hamburg, our grid]”, led to power generation being returned to government structures.

In Paris, the council privatised its water distribution system, hiring two firms considered world leaders in the field. This led to under-investment in municipal pipelines (sound familiar?) and the fleecing of city finances through huge, hidden profits. How was this resolved? The city created a public company called Eau de Paris, which, when operated efficiently, saved millions annually while reinvesting in infrastructure.

This, of course, sounds like how Joburg Water should be run. Those in charge know just what needs to be done to ensure a seamless supply of clean water to a growing populace. The only problem is that those to whom they report are at sea about what to do. When they make decisions that undermine Joburg Water, they have no idea how this will affect all of us in a few years. If they aren’t ignorant, then they just don’t care. I am not sure which is worse.

In the past, we had the Washington Consensus, in terms of which loans were granted on the proviso that services were privatised. Joseph Stiglitz, former World Bank chief economist, admitted the policy’s failure, acknowledging global financial institutions confused means with ends. Mischaracterisations happen. Renationalisations happen too. And some firms are too big to fail.

Before we rush to embrace private capital or simply swap one structure for another, we must carefully scrutinise the underlying assumptions. Before we say Madlanga must be a permanent commission, or that municipalities require private business to solve problems, what problems are we not resolving at source? Paris, Hamburg and the UK teach us that to obviate renationalisation, we must never assume that private capital necessarily translates to better governance. And vice versa.