Spring Cleaning: With Eskom and Transnet given the boot, business gets serious over corruption and incompetence

The name of the campaign launched by Business Leadership South Africa (BLSA) in Cape Town on Thursday was #BusinessBelieves – and the group made it clear that business believes it is government, and not the private sector, which is currently failing South Africa.

In a month dominated by discussion of the wrongdoing of Bell Pottinger, KPMG and McKinsey in the ongoing state capture saga, BLSA CEO Bonang Mohale sought to redirect the narrative back in the direction of government.

“As we acknowledge our own failings,” Mohale said, “we must also highlight that these problems are much, much greater and more serious in the government sector than in business.”

He was speaking less than a week after BLSA announced the suspension of KPMG from the body on account of the firm having become “party to the project of state capture which has harmed our country, victimised certain individuals and damaged the reputation of business”.

On Thursday, Mohale cited the action taken against KPMG as evidence that business is “clearing our house first and foremost”. He argued, however, that a more forceful culture of accountability is evident in business currently than in government, where nepotism and corruption are given free rein.

BLSA is now taking a stand against what it considers as two of the worst offenders: the country’s electricity provider, Eskom, and the national rail, port and pipeline company, Transnet. Both state-owned entities have had their membership of BLSA suspended with immediate effect as a result of “numerous allegations of corrupt behaviour and colossal failures of corporate governance and accountability”.

Perhaps most worryingly, BLSA indicated that it had met with both Eskom and Transnet to engage them with their concerns “over a long period” – and been given no reassurance from either SOE that they were truly committed to righting the ship.

“Neither of the SOEs were able to give BLSA comfort that they appreciated the seriousness of the issues at hand, or that they had the requisite will and purpose to put their houses in order,” Mohale said.

The BLSA CEO singled out Eskom for special concern due to the importance of the SOE to the economy as a whole. Condemning the “seemingly endless pattern of corruption at the top” of the electricity provider, Mohale said that the country would remain imperilled by Eskom until an honest and experienced chairman, board and executive were appointed.

Business Leadership South Africa has, up until now, hardly been a household name in the country, so it’s worth briefly exploring what exactly it is. BLSA is an industry body with a membership made up of “major South African corporations”. Membership is granted by a 12-person board, including CEO of the Johannesburg Stock Exchange Nicky Newton-King and Investec CEO Stephen Koseff. Listed members currently include all the major banks, car manufacturers and telecommunications networks. For conspiracy theorists: if you’re looking for the local version of Illuminati, this is probably as close as it gets.

BLSA’s stated mission is to “engage key players in South African society, including civil society and labour, to exchange ideas in our national interest, and to create effective dialogue with government and other stakeholders”. It aims to encourage investment, support black leadership and help grow small businesses.

Membership of BLSA comes with a steep price tag, at R1-million annually. Mohale told Daily Maverick that this is to “fund the BLSA activities as per the new approved strategy and budget 2017”.

This cost is relevant because it was cited by Transnet – though without giving an exact figure – in its response to the suspension.

Eskom and Transnet took two quite different routes in responding to the news: for the former, contrition; for the latter, defensiveness.

Eskom spokesperson Khulu Phasiwe adopted a downright self-flagellating approach, saying: “When you are wrong, there is no need to fight back when you know how much you need to be punished.”

Phasiwe said Eskom will “self-correct” by taking “stern action” against individuals found guilty of wrongdoing by “the current internal investigation and the mooted parliamentary inquiry”.

Transnet, by contrast, fought back, accusing Mohale of misleading the public in a “spectacular fashion”.

Transnet’s version of events is that it was the SOE which ditched the BLSA – communicating in August that it would not be renewing its membership “due to cost-cutting measures”.

Interviewed on 702 on Thursday night, however, Mohale said that the BLSA has been raising “substantive issues” with Transnet since the beginning of the year with no joy. He confirmed that Transnet did contact BLSA in August, but simply to query the rise in membership fee – which Mohale offered to sit down and discuss with them, but a meeting date was never made. He was adamant that Transnet at no point stated that it was terminating its relationship with BLSA.

Mohale explained that subsequent to signing an anti-corruption pledge this month, “we then choose, as BLSA, to disassociate ourselves from both Eskom and Transnet because they have been captured”.

Transnet also stated in response to BLSA’s suspension that it is “conducting its own investigation” into its procurement processes. “Should any actionable facts arise, necessary steps will be taken,” it said.

There will be little tangible fallout for Eskom and Transnet as a result of the SOEs’ suspension from BLSA. The damage is reputational.

Its significance lies in the message that South African business is sending to government: that the private sector is no longer willing to stand by while the economy is tanked through poor leadership. This is a message that has been amplifying steadily for the past few months, voiced passionately by businessman Sipho Pityana at the Daily Maverick The Gathering in August.

As evidence of the growing disconnect between business and government in South Africa, the World Economic Forum’s Global Competitiveness Report, released this week, is illustrative. When it comes to factors like business innovation, market development and business sophistication, South Africa ranks easily in the top quarter of countries internationally. For almost every metric dependent on government – such as healthcare and education – South Africa plummets to the bottom of the rankings.

Mohale’s address on Thursday is one more indication that the patience of South African business is wearing thin.

“For too long we have remained on the sidelines but today we say loudly and clearly that business is ready to play a full part in the transformation that South Africa so desperately needs and to make sure this country works, not just for the privileged few but for everyone,” he said. DM

Photo: BLSA members’ logos. (By BLSA)