Gordhan’s R250 billion waiting game: report
Public Enterprises Minister Pravin Gordhan is working at a snail’s pace, irritating not only South Africans but also wealthy Chinese state-owned enterprises (SOEs).
Over the last year, the failures of Eskom and Transnet have placed extreme pressure on the South African economy, with growth hampered and thousands of jobs at risk.
However, City Press and Rapport reported that the China Communications Construction Company Limited (CCCC) are furious with the South African government over a lack of feedback on a R250 billion plan to turn around the country’s ailing energy and logistics sectors.
CCCC’s proposals for Transnet include building a beneficiation park for chrome, iron ore, aluminium and more and creating a freight handling depot outside Johannesburg that could reduce turnaround times by eight hours.
In addition, In July, the China Harbour Engineering Company (CHEC), a CCCC subsidiary, said it could create a comprehensive plan for a gas-fired power station in Richards Bay if the Minister were interested.
However, in September, Gordhan said that locomotive issues were Transnet’s priority, with it apparent that he specifically wanted funding to solve Transnet’s immediate operational challenges.
Although CHEC told City Press that they are still waiting to hear if the South African government is interested in the R250 billion plan, it is believed that Gordhan is only seeking funding for his own plans to fix Transnet.
Leadership hole
This comes as both SOEs search for new permanent CEOs, with the Minister’s tardiness severely impacting Eskom.
Despite the Eskom board sending their preferred candidate for CEO, Gordhan rejected the nomination, stating that he needed three names to be sent to him.
According to insiders at Eskom and the world of politics, political interference was at play, as the political leaders wanted Central Energy Fund board chair Ayanda Noah as the next CEO, whilst the board nominated Eskom manager Dan Marokane.
Professor Parmi Natesan, CEO of the Institute of Directors in South Africa (IoDSA), argued that Gordhan’s rejection highlights the ineffectiveness of SOEs due to constant government intervention.
“Governance best practice is for the board to appoint the CEO so that he or she is accountable to the board,” Natesan said.
“The challenge is that SOEs have enabling legislation or founding documents which often stipulate that the government (effectively the shareholder) has the power to appoint senior management, as well as the board.”
“King IV (a South African corporate governance code) recognises this and suggests in the SOE supplement that the board be fully involved in the appointment of the CEO and that both parties agree that the CEO is accountable to the board, not the Minister, as representative of the shareholder.”
She said that blurred reporting could occur if this approach is not followed, as a CEO, without the board’s confidence, would simply report to the Minister.
She added that both the board and the Minister should be questioned over their motives following this debacle, with the former seen as rebellious for naming its preferred candidate and the latter potentially having a hidden political agenda.
“In a perfect world, though, the appointment of the CEO should be the board’s prerogative. The board would then be able to hold the CEO properly to account and could, in turn, be held to account by the shareholder,” Natesan said.
Despite the chaos, Gordhan has offered a slight positive, with Eskom likely to name a permanent Eskom CEO later this year.
That said, Transnet’s search is expected to take longer as current CEO Portia Derby will only leave the role at the end of the month.
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