Political Leadership of South Africa's Parastatals Leaves Much to Be Desired

Article excerpt

BYLINE: Andile Sokomani

WHILE it takes little cerebral effort to see that all is not well in most state-owned corporations, a generous dose of mental dexterity is required to remedy the problems.

This involves accounting officers and departmental directors-general, but also executive officers, including Cabinet ministers, who are often required to give direction to the parastatals.

Departmental leadership and oversight over their parastatals leaves much to be desired.

Most South Africans are acutely aware of the skills shortage plaguing Eskom, which has plunged the country into a serious energy crisis. Eskom, however, should take less blame than its political stewards, including the Department of Minerals and Energy, which failed to take necessary precautions. Citizens will now have to put up with the consequent steep rise in the price of electricity. The Department of Agriculture and Land Affairs's leadership and oversight over the beleaguered Land Bank has also not been impressive. This is perhaps not surprising given that the department has itself been, in the last two consecutive years, struggling to obtain unqualified audits - with the Auditor General (unable to verify physically 69% of its comprehensive sample of assets). Also a cause for concern is that there are reportedly more than 1 200 vacancies in the department.

The current woes in the Land Bank reflect deficiencies in the Department of Agriculture and Land Affairs.

The Auditor-General recently tabled the bank's fourth consecutive qualified audit. In certain respects, he could not verify the bank's financial position. This had something to do with loans that were issued under questionable circumstances.

A subsequent forensic report into allegations of corruption at the bank confirmed that some of the loans issued "lacked logical business sense". As a result, the bank's operating capital tumbled from R3.1 billion in 2001 to R1bn in 2007. Early last year the Cabinet approved a R1.5bn guarantee and a R700 million cash injection. Without this recapitalisation, the bank might not have been able to pay its own funders. The parastatal was meant to generate its own profit rather than rely on the taxpayer to subsidise it.

While servicing emerging farmers may have led to loss of established commercial farmers as clients, thus further shrinking the capital base, the bank's real source of decline can be traced directly to failure by the Department of Agriculture and Land Affairs to appoint suitable management. As in the case of Eskom, the pressure to transform has seen the bank losing many experienced members to commercial banks. The ministry has been unable to handle this issue skilfully.

The real losers in the end are the emerging farmers the bank is meant to help. More than R1bn appears to have been sanctioned to fund land developments for golf estates, theme parks and residential property, rather than needy farmers. …