SA: To nationalise or not?
cc The South African government will have to bail out private companies as the global financial crisis begins to bite the national economy, writes William Gumede. But which companies should the government nationalise? Moreover, given its 'depressing record' thus far, is it actually capable of running a complex organisation without making the headlines for mismanagement and corruption? Dismissive of BEE consortiums or majority foreign ownership as an alternative, Gumede calls for ‘a stress test’ to prioritise which companies to rescue, based on what the country would lose if they were to close.
To ease the wave of job losses, factory and mine closures as a result of the global financial crisis, the question should not be whether the South African government should bail out or nationalise certain struggling companies, it should be: Which ones?
The very real immediate danger about nationalising a private company is that the South African government‘s record of managing complex public organisations is depressingly poor. Of all the state-owned organisations, arguably only the Industrial Development Corporation (IDC), Development Bank of Southern Africa (DBSA) and South African Revenue Service (SARS), are being managed well. PetroSA, a state-owned company set up to be supposedly run with the nous of an efficient private company, albeit with national development objectives – which is certainly the way to go – is still misfiring.
Most of the other state-owned organisations are mostly in the news for mismanagement, failure and corruption. So there is a real danger that any company that will be nationalised by government or even any new state-owned company set up will be beset with mismanagement, jobs-for-pals and corruption. Even the new proposed state-owned mining company will fail like South African Airways (SAA) and the South African Broadcasting Corporation (SABC), unless only the best talent is appointed to run it.
ANC leaders must forget about the ideology, faction or colour of the management appointed to run the proposed state-owned mining company, or any other new state-owned company. What must now count is to set clear developmental targets, namely job creation, beneficiation, skills transfer, and so on, for the new company, and then appoint only the best managers, on merit, to deliver on these targets. If they don’t deliver, fire them.
Handing over struggling companies to black economic empowerment (BEE) tycoons or consortiums must be an absolute no-no. In this national economy emergency, we cannot afford the luxury of giving away scarce funds and resources to enrich individuals. To date, none of the BEE companies or individuals has contributed anything substantial to expand the skills base, to come up with totally new industries, or lift communities out of poverty.
We must set a stress test for bailing out or nationalising companies. The test for bailing out a company must include whether South Africa will lose strategic industrial and technological capacity, mass jobs, and the social costs to the surrounding community, region or province if the private company closes.
Crucially, it will be important to see whether the technology can be transferred to other sectors, and whether a company would be sustainable in the future, but just needs financial support to survive the current financial global meltdown. For example, not only is the automotive industry crucial in the economically depressed Eastern Cape, it also has strategic capacity and technology which can be transferred elsewhere: Building a locally owned industry to build buses, mini-business and rail coaches, during this economically depressed period.
Platinum is another industry that cannot be allowed to go belly up. Platinum is a strategic metal. For one, Chinese state-owned companies are eager to buy up struggling local platinum mines. In fact, state-owned Chinese companies are trawling Africa, looking for bargains – often strategic mines, agricultural land and companies – to buy for a song during this difficult time for African economies. It will be a mistake to hand-over majority ownership of such a strategic metal to the Chinese. Any foreign buy-in must not be a majority share, and it must be strictly policed to see that there is job creation, skills transfer, injection of real money and technology, and that most of the latter two stay in this country.
* This article first appeared in the Sowetan.
* William Gumede is author of Thabo Mbeki and the Battle for the Soul of the ANC.
* Please send comments to [email protected] or comment online at http://www.pambazuka.org/.