Poor service delivery, low productivity just a few of the knock-on effects of State Capture

Napoleon III reputedly tried to solve his country’s unemployment crisis by sending one team of workers to dig holes in the morning and a second lot to refill them in the afternoon.

But governments don’t create jobs by creating jobs; they create jobs by advancing the right environment. Part of advancing the environment is for government to deliver services efficiently and well. Poor delivery of services drains growth and bleeds competitiveness.

We have argued that the impact of State Capture is far worse than often credited. Indeed, while at face value the direct cost attributed to State Capture appears to be large, it is nowhere near large enough on its own to directly impact an economy of well over R6-trillion.

Rather it is the knock-on effects of State Capture – poor practices, low productivity, indecision and tentative management – that are responsible for the slow growth, high unemployment and increasing inequality that have characterised the Zuma-Ramaphosa years.

An obvious place to look is procurement, where fear of corruption has driven procurement from a source of productivity and innovation to one of compliance and inefficiency. However, in many government entities, the wage bill exceeds the operational budget for delivering services.

So much so that the high wage bill is often cited – for example in municipal entities – as a reason for breakdowns in service delivery. For this reason, we argue, low productivity often trumps bad procurement as the number one source of underinvestment and poor delivery of service.

One of us worked in Europe at the time of the German transformation. He recalls a project in which we worked closely with the director of an East German power station.

For years the director had been arguing that he needed more people, more technicians, more engineers and more support to run the station. When the Berlin Wall came down, we suggested that this presented him with a unique opportunity for a management buyout. The response of the director was immediate and visceral. “How can I run this plant with all this dead wood I have around me?”

Having people do jobs that are redundant and unnecessary is the equivalent of digging holes and filling them in again. No one wants to look back at their work life and say that they did a job that really was not needed.

This contrasts with a project at the same time, in the same country, with a successful organisation in a highly competitive industry. Grundig, then a world-class brand, asked us to look at how to improve labour productivity.

In a meeting during the project, we indicated a position over four shifts that might not be needed. The director challenged us immediately, lifted the phone and called his line manager. After a string of questions, he concluded with the sentence: “Well then, I am expecting that those (contractors) will not be there come Monday morning.”

In the world of private and publicly owned organisations, productivity is always near the top of the management agenda. One of the consulting companies with which we work uses the mnemonic RADIOSE. What can be Redistributed, Automated, Digitised, Innovated, Optimised, Streamlined or Eliminated? There is an expectation that every few years the productivity of labour will be reviewed from a zero base. And that over time, productivity will improve.

In the Mandela and Mbeki governments, tools were in place to foster delivery and efficiency. There was a real belief that government could go toe-to-toe with privately owned organisations. This was operationalised under the concept of a developmental state; that is, with the premise that there are areas where market failure would require the intervention of an efficient and driven public sector.

The current structures supporting state organisations do not encourage continuous improvement. In the current climate, no sensible manager will voluntarily give up positions on an organisation’s chart which Treasury has approved. Government departments spend allocated money not to enhance delivery, but to prevent their allocation from being confiscated by the centre.

In all cases, work should be quantified and aligned. Different types of work require different approaches. Transactional activity, such as call centre work, is driven by volume. Value-driven work, such as development, is measured in relation to value add. Station-filled positions are binary and reviewed in combination.

If this is not done regularly, the misalignment over time results in a shock. 

The Post Office this year announced the need to cut 6,000 jobs, and Telkom 2,000. This is a quantification of unneeded activity. It puts a number to the digging and filling of holes. We argue that this is carried through to many other state organisations and is one of the biggest barriers to economic sustainability.

Skills audits, which are occasionally requested, do not address the problem of productivity. People can have multiple skills just as they can have multiple degrees. In consulting parlance, an organisation is sized according to the workload; positions are filled according to ability.

Yes, we have come across – both literally and figuratively – drivers in the public sector who do not have a licence. And the appropriation of temporary posts to transport them around. This has more to do with decision-making and performance management than with the tools of productivity; this is a topic on its own.

We argue that State Capture on its own should not have had the impact on growth, unemployment and inequality that is characteristic of the Zuma-Ramaphosa years. Rather, it is the knock-on effects that are responsible for our current stagnation.

One of the major drivers of poor delivery, high cost and low value is that of labour productivity. State Capture has put the brakes on much-needed productivity improvement. DM