Why commissions are not the way to fix SOEs

WHAT does a South African do when he has absolutely no idea what else to try? Set up a commission of inquiry, a review commission or a panel of experts. These phrases are as much a part of the policy lexicon in this country as losing crunch matches is a part of our national cricket team’s psyche.

The latest commission is tasked with reviewing the roles and functioning of our various state-owned enterprises. So we can expect for the umpteenth time to hear tired ideological arguments about the merits and demerits of privatisation being rehearsed.

It does not, however, take an expensive German strategy consultant or an overzealous MBA graduate to realise that the problems with our state-owned enterprises are fundamentally practical rather than ideological. This is not to say that politics or ideology are irrelevant in making sense of, and reversing, problems within our state-owned enterprises. But these political aspects often obscure other realities of equal importance.

These other realities are much more mundane and so generate less excitement; they lie on the strategic, operational and organisational fronts. The review commission would do well to reflect on how political leadership can lend a hand on these fronts rather than mostly kicking around high-level arguments about the general pros and cons of full or partial privatisation.

A simple example illustrates the point bluntly. One of Transnet’s near permanent problems is delivering coal to Eskom in time to generate enough electricity so we can watch Generations uninterrupted. This requires Transnet to deliver the contracted amount of coal tonnage and to do so within the agreed times. Yet, every year Transnet falls short of what they need to deliver.

This is sad for a couple of reasons. First, it is cheaper to rail coal to some power stations than it is to transport the stuff by road. Second, the trucks that do the road transportation kill pedestrians more often than trains do. Third, the carbon emissions from our trains are less than those from the trucks, which is not an unimportant consideration in this green day and age . It is therefore cheaper, safer and greener to have ramped-up coal volumes delivered to Eskom by rail. This would result in a net saving on the production cost of electricity and ultimately reduce our electricity tariffs.

Transnet keeps failing to deliver. Shockingly, it fails to deliver because of embarrassingly basic operational and organisational inefficiencies that could easily be fixed. The core problem, to take our case study further, is that the turnaround time for getting trains from coal mines to a power station and back to the mines is much higher than what any optimisation model tells us it should be.

It is here, however, that common sense and practical insight overtake politics and ideology. If a train breaks down, and a driver needs an engineer, it does not help if he does not know who to call. Or, if a driver’s eight- hour driving shift is over, but the train itself has not yet reached journey’s end, then a replacement driver needs to be waiting at the spot where the current driver will get off.

This requires a manager in charge of his drivers to know every train’s journey, map out on a white-board the times when trains will reach key points along the route, and then get the drivers assigned to start at appropriate times at appropriate spots with a bakkie or kombi ready to shuffle them around.

I have no doubt that discussing such practical intervention sounds about as exciting as listening to the president deliver his state of the nation speech. But that is exactly my point. Politicians need to restrict their role to allowing career civil servants to get on with it. That should be the point of political oversight.

You do this not by deploying a cadre to head Transnet Freight Rail but rather appointing someone with a nerdish, career- long obsession with trains and goods. That is the sort of person who will get excited about what business teachers call spaghetti charts and figuring out how to untangle them. Such folks have the know-how to help a team think through the operational inefficiencies that prevent a place like Transnet from having trains that run at the optimal turnaround time when they take coal to customers such as Eskom.

Political appointees often cannot even understand the PowerPoint presentations of pricey consultants. Many are semiliterate, financially, and certainly not apt to lend a hand in brainstorming micro-level inefficiencies within their particular enterprise.

A couple of important conclusions follow. First, political leadership and oversight of our state-owned enterprises are not inherently poisonous. Rather, political oversight needs to be aimed at improving state-owned enterprises operationally, organisationally and strategically. The old privatisation debate is a red herring. Second, and related, political oversight should be provided at the highest levels, coming from directors-general and cabinet ministers. Within the state-owned enterprises themselves, appointments, right up to CEO level, should be based solely on industry knowledge and expertise.

Fewer commissions, better industry headhunting and greater capacity development are the things that the president should be insisting on. If not, the developmental state will remain a dream deferred.

http://www.businessday.co.za/articles/Content.aspx?id=108977