On the Brink. Claire Bisseker
Treasury, organised business refrained almost entirely from commenting publicly during Nenegate and throughout Gordhan’s early travails with the Hawks.
The corporate world appeared to have defaulted to its long-held position of ‘going along to get along’ – a tendency that can be traced back to the second Mbeki administration where business learnt to be silent on those issues that were guaranteed to provoke a scathing backlash. (In Mbeki’s case, these were HIV/Aids and Zimbabwe.)
Certainly business found itself in a tricky position, for it appeared to be enjoying closer ties with government than at any time since Zuma had taken power in 2009.
Under the direction of Gordhan and BUSA president, Jabu Mabuza, several practical, action-orientated work streams were formed, headed by senior CEOs working with state officials. These were aimed at preventing a sovereign-credit downgrade, stimulating small-business development, expanding government and private sector co-investment in infrastructure, reforming SOEs and eliminating regulatory hurdles that were stymieing investment.
The exhibition of greater trust and coordination between the business sector and government paid huge dividends when South Africa passed the mid-2016 reviews of the three main rating agencies – Moody’s, Fitch and S&P – without suffering a single notch downgrade.
For the first time, the government was able to give the rating agencies exposure to a much wider range of credible voices on the economy. The likes of Nedbank CEO Mike Brown, JSE CEO Nicky Newton-King and Barclays Africa chair Wendy Lucas-Bull stood alongside Gordhan, presenting a united front against a potential downgrade.
At a key briefing, Brown invited S&P executives to look out of a vast picture window in the JSE building across a bustling Sandton. There were at least a dozen cranes on the horizon. ‘It really didn’t look like a sub-investment grade country,’ he said.22
But good PR can take a country only so far. Many local commentators were far from convinced that the Team South Africa approach would result in real change.
‘Team South Africa is a little bit like Tutu’s Rainbow Nation. It makes you feel warm and fuzzy but it only plasters over the wound that festers beneath,’ said Pan-African Investment & Research Services CEO, Iraj Abedian. ‘I’m not saying we shouldn’t do it, but we shouldn’t be naive and think that just because Pravin Gordhan and some CEOs have got together that it will resolve the lifestyle issues of the patient in the ICU. The minute the patient starts breathing they’ll start fighting again.’23
Business Day opined that while the vision of Team South Africa was ‘heart-warming’ and constituted a welcome change from almost a decade of frosty relations between business and government, it was also ‘a kind of pantomime in which all players know their part, which they are duty-bound to play’.24
The problem was that the initiative lacked any genuine political backing. Though no one doubted the effort business and the Treasury were putting in, very little was changing in the way the rest of government continued to operate.
‘There is considerable energy and commitment behind this new proactive partnership approach,’ said Spicer. ‘Yet these groups are ad hoc interventions that run in parallel with ever more egregious evidence of state capture by private business interests and the political corruption of key agencies and SOEs by these interests, often using the security apparatus and seemingly acting on behalf of the president.’25
Something smells in the SOE stable
At SAA Gordhan’s reformist zeal ran head-first into the brick wall of Zuma’s intransigence. Technically bankrupt, and kept afloat only on the basis of government guarantees, SAA was running through cash faster than a Gupta wedding party through customs.
Gordhan insisted that the board chairperson, Dudu Myeni, and her board needed to be replaced before the Treasury would provide any further bail-outs to SAA. Myeni is widely acknowledged to be a close friend of Zuma’s. She is also head of the Jacob Zuma Foundation. Former SAA board member and JSE CEO Russell Loubser once said of her: ‘If she has any business acumen, it’s very well hidden.’26
At the height of the SAA stand-off, Zuma conducted a public visit to the national carrier, committed his government’s assistance ‘at its highest level’ to help the airline overcome its challenges, and insisted that it would never be sold.
Le Roux points out that what Zuma should have said to SAA staff – had he been singing off the same hymn sheet as Gordhan – was that, one day, they would be working for a private owner, and that this would be a good thing.
The stalemate between Gordhan and Zuma over SAA was the very antithesis of what the investment community needed to see. Nevertheless, the rating agencies gave South Africa the benefit of the doubt at their mid-year reviews, presumably believing that even if he didn’t win every battle, Gordhan would succeed in pushing through enough structural reform to begin to turn the ship around.
But no sooner was the ink dry on the rating agencies’ affirmations than South Africa was embroiled in two further scandals, both of which demonstrated the inability of Gordhan and his business working groups to prevent the continued manipulation and deterioration of South Africa’s public enterprises.
At Auckland Park, the SABC’s brazen chief operating officer, Hlaudi Motsoeneng, defied an order by the broadcasting regulator to reverse his decision to stop showing violent protests on TV. Several SABC staff members were suspended and later fired for refusing to bow to this edict and for balking at his subsequent refusal to allow them to cover protests outside the broadcaster’s own gates over acts of censorship. Though the journalists were later reinstated, several made claims of death threats and continued harassment.
Motsoeneng derived his unassailable authority from the SABC board and the communications minister, Faith Muthambi. When challenged over the COO’s reign of terror, the minister reportedly said: ‘But Baba [President Zuma] loves him [Hlaudi], he loves him so much. We must support him.’ 27
All this flew in the face of the Public Protector’s February 2014 ruling that action should be taken against Motsoeneng, who lacks a matric certificate, for lying about his qualifications and for hiking his salary from R1,5 million to R2,4 million within a year.
The board and minister even went so far as to petition for leave to appeal the subsequent ruling of High Court judge Dennis Davis, which set aside Motsoeneng’s permanent appointment as COO. The situation went from tragedy to farce when, despite having lost in the courts, the board arranged for Motsoeneng to be rehired in a different but still very senior executive capacity. This move was, in turn, struck down by the courts and by the end of 2016, the entire SABC board had resigned following a belated intervention by Parliament. In early 2017, the media reported that the broadcaster had run out of cash and was operating off its dwindling reserves.28
Meanwhile, at SAA the situation was also lurching from crisis to crisis. In early July 2016 it emerged that the board had contracted little-known boutique financial advisory firm BnP Capital to help it restructure its R15 billion debt, and to help re-raise that amount, for a staggering R256 million fee. This reportedly went against the advice of SAA’s own treasurer, who had balked at the price tag, as well as the requirements of the Public Finance Management Act that provide for the National Treasury to be alerted. It subsequently emerged that BnP Capital’s licence to operate had been suspended by the Financial Services Board at the time due to its failure to comply with ‘fit and proper requirements’.29
In the light of these flagrant breaches of SOE corporate governance, the real question in South Africa had now become not how much structural reform Gordhan’s Team South Africa would be able to push through to get growth going, but how little structural reform South Africa could get away with under Zuma and still avoid being downgraded to junk status.
‘The structural reforms listed by Gordhan, and urged by rating agencies, the IMF and business, all require political muscle,’ observed Business Day’s Carol Paton in an editorial.30 ‘Even in the heyday of the treasury’s power under Trevor Manuel and Maria Ramos, who had presidential support in Thabo Mbeki, no headway was made. Now, with the ANC split