Billions Lost: SA’s State Entities Struggle Under Poor Leadership

Poor leadership, political meddling, and pervasive corruption are the main causes of the current crisis afflicting South Africa’s state-owned enterprises (SOEs). These organizations—from SAA and the SABC to Eskom and Transnet—have squandered billions of dollars from the national budget, but they still show no signs of significant change.

According to experts, the individuals in charge of them are the root of the issue. Executives, CEOs, and boards are frequently chosen for their political connections rather than their qualifications. And that’s only the start.

Top Positions Held by Unqualified Leaders

Many SOE leaders, according to Professor William Gumede of the Wits School of Governance, lack the knowledge and expertise required to manage complex organizations.

“The majority of those at the top are ignorant of the industries they work in. He claimed that they are employed due to their political connections rather than their qualifications.

Gumede claims that entities are paralyzed as a result of this double blow of political favoritism and incompetence. Strong operational or leadership abilities may be helpful even if one is unfamiliar with the industry. All too frequently, however, appointees don’t contribute either.

Corruption Associated with Abuse of Procurement

Gumede identifies the second main problem as corruption, especially in procurement. Rather than giving contracts to competent black-owned companies, SOEs select politically connected firms that frequently don’t provide any services at all.

“You wind up with exorbitant costs, redundant payments, and no real services provided. As these organizations’ operations fail, money is being embezzled from them,” Gumede stated.

He points out that there might be some return on investment even if services were provided in spite of the corruption. “But at the moment, money is disappearing without producing anything—no services, no infrastructure upgrades, nothing.”

Unions Protect Ineffectiveness and Pervasive Political Interference

The function of unions is another significant issue. Some union leaders hold positions within the organizations they are supposed to influence, and many SOEs are heavily unionized.

Gumede details instances where union ties that extend all the way to the president thwarted efforts to hold employees accountable, especially at Eskom. People become untouchable as a result. No matter how poorly they perform, they cannot be fired,” he stated.

There is more political capture to come. Many political structures are connected to boards, management, and suppliers. “Bailouts immediately revert to the same dysfunctional systems.” “You maintain the same individuals, the same procedures, and the same shortcomings,” he cautioned.

Bailouts Without Reform are a surefire way to fail.

For many SOEs, bailouts have evolved into a lifeline rather than a solution. According to Gumede, these financial infusions are frequently made without accountability, making them unsustainable.

Some people think that because these businesses generate jobs, they should be preserved. However, what good is it to save a company that is losing money and showing no signs of recovery? He inquired.

He emphasized that bailouts devoid of performance evaluations constitute a waste of tax dollars. “In the end, we marginalize capable Black professionals without political ties. This is a hugely missed chance for genuine change.

Gumede thinks that if certain SOEs are unable to demonstrate improvement following bailouts, they ought to be closed. Additionally, he criticized the National State Enterprises Bill and Operation Vulindlela as ineffectual reform initiatives.

Because they don’t address the underlying issues, these reforms are failing. Merit-based hiring, performance accountability, and complete transparency are what we need,” he stated.

Political reform and public responsibility are crucial.

The public’s silence was also criticized by Gumede. Voters must quit supporting political parties that fall short of their promises. They need to speak up and insist on responsibility.

He suggested that an impartial panel with open procedures handle SOE leadership appointments in place of political decision-makers.

Gumede claims his suggestions have been mostly disregarded despite his participation in reform initiatives under Presidents Cyril Ramaphosa and Jacob Zuma.

Political will is the missing component, according to analysts

The largest obstacle, according to Professor Sipho Seepe of the University of Zululand, is political will rather than technical difficulties.

For those with political connections, SOEs have evolved into employment agencies. “What message does it send to public servants if the president himself avoids accountability?” he inquired.

Seepe thinks President Ramaphosa has set a bad example by not taking decisive action on matters like the Phala Phala scandal.

Gumede and Roodt cautioned that without addressing political leadership and upholding anti-corruption legislation, no reform will be successful. Although the Zondo Commission has outlined a plan, most of its suggestions have not been implemented.

“How can we think they’ll fix anything else if they can’t even address the Zondo report?” “Roodt said.”

Until then, the same individuals may continue to run South Africa’s state-owned businesses, leaving taxpayers to bear the financial burden.

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Sourced:IOL

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