Pravin Gordhan: ‘This job requires resilience’

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Pravin Gordhan has fielded criticism over his five years at the helm of the department of public enterprises. This is as the country’s state-owned entities — which have long threatened to break the back of an already fragile economy — have proven obstinate to change.

Now, as the country continues to endure severe load-shedding, the ANC has resolved that state-owned entities be moved out of Gordhan’s department. The decision has attracted widespread commentary and analysis. But the minister has remained silent on the subject.

In an interview with the Mail & Guardian this week, Gordhan outlines the problems that have come with rehabilitating state-owned entities after years of state capture, as well as what the next phase of their rebuild holds.

The first step the department had to take back in 2018 was to address governance issues at state-owned entities. This required changing their boards, Gordhan said.

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Governance, operations, finances 

Boards “play an important role, if they are rigorous, in terms of making sure that proper procedures are in place, but — more importantly — making sure that proper controls are in place. So that you, or I, or anybody else can’t just go off and do our own thing. You have got to have the proper checks and balances in place,” the minister said.

“That is happening, but not adequately.”

In large entities such as Eskom, which have multiple sites and tens of thousands of employees, strong controls are important. Without them, there is the risk that malfeasance will spread.

“For every single serious commodity or service that is offered, there is an element of malfeasance. Some of that can be controlled, through these control mechanisms. Some of those you detect post facto and you do something about them …. Every entity has done that,” Gordhan said.

Public Enterprises Minister Pravin Gordhan noted that, when state-owned entities were captured, their governance, as well as their operations were turned upside down. (Delwyn Verasamy/M&G)

But boards are not the be-all and end-all of solving the governance problem. “Although in terms of the PFMA [Public Finance Management Act] boards are the accounting authority, they will meet once a quarter, sometimes more frequently when there is a crisis, which is the case in some of the entities, but you’re not the management,” he noted.

“So the next element is, what kind of managers do you have in place. So in many of these entities, managers have changed. Some have done superbly, others have battled.”

The next step in solving the governance problem at state-owned entities has involved changing their culture. “If you don’t change the culture, then you’re still going to be contaminated by the past,” Gordhan said. “So how you do things, how you buy things, how you transact, all that is part of your culture. And, importantly, work ethic.”

The current situations at several state-owned entities demand urgency. “But if you are a cruiser, you won’t see the urgency. And so you have to sort of, in a sense, drill urgency. But that also has to have tiers of management that have to understand it themselves …. So it happens in some places, it doesn’t happen in other places.”

Gordhan noted that, when state-owned entities were captured, their governance, as well as their operations were turned upside down. “So what we are battling with in some places is operational rigour.”

Getting operations right is crucial, the minister said. “That doesn’t happen easily. Because for eight to 10 years, you have allowed the wrong culture, the wrong disciplines, the wrong rigour, the ability to deviate from the standard operating procedures.”

A consequence of the operations at many state-owned entities being allowed to fall by the wayside is that their financial positions were compromised, Gordhan pointed out. 

“Financial stability is something we are still grappling with,” he said.

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The people issue

Another issue state-owned entities are still wrestling with is what Gordhan calls “the people issue”.

“There is a degree of a skills deficit — partly created, again, by state capture. We had top people who are today sitting in the Middle East, the Philippines … and elsewhere in the world. And you have got to create the conditions where they will come back. Some will, some won’t.”

Gordhan also spoke of the complexities that come with navigating the markets that state-owned entities operate in, which are often subject to huge fluctuations. “So on the one hand you have got to clean up the past. The second dynamic is that you want to stabilise the operations of that business. Thirdly, you want to get the finances right. And then you’ve got to, fourthly, become aware of what are the dynamics in your market.”

He noted that many of the bigger entities have had to adapt to new conditions brought on by the pandemic, China’s closure and stubborn supply chain issues. “The sectors in  which you operate are undergoing very dynamic changes that, a) are things that you need to take cognisance of and b) you need to make sure that, to the extent possible, you reflect those changes in your own country.”

Public Enterprises Minister Pravin Gordhan spoke of the complexities that come with navigating the markets that state-owned entities operate in, which are often subject to huge fluctuations. (Delwyn Verasamy/M&G)

Eskom’s unbundling was a result of this type of sectoral assessment, the minister said. 

When the decision was made to unbundle the power utility, Gordhan and his “ramshackle” team at the time were mandated to produce a roadmap for its implementation, which the minister says is being executed. “We’re going to inject some adrenaline into that soon,” he added.

“That will start speeding up some of those processes. And you will see the changes that are being made. And it will change the structure of the electricity industry in South Africa in the next couple of years.”

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All hands on deck

Eskom is now entering the next phase of its rebuild.  

Rehabilitating state-owned entities — fixing governance, operations and their finances — requires capacity. “What we require is a lot more skills, because the few people that work are working very hard … We don’t have cash for people,” Gordhan said, adding that a number of business people have volunteered to help out.

Jacky Molisane, the department’s acting director general, said the department had lost a number of experienced professionals who left amid worries about potential reputational damage.

“Now we are in the process of building and bringing those skills back ….  So we are in the process of rebuilding and attracting people. And people are coming. So we are beginning to lay that foundation,” hesaid.

Molisane called the current phase in the rebuilding of state-owned entities an exciting one. “We are building. As you know, it is easy to destroy an organisation, but it takes time to build it. So we need all hands on deck.”

When the decision was made to unbundle Eskom, Gordhan and his “ramshackle” team at the time were mandated to produce a roadmap for its implementation, which the minister says is being executed. (Waldo Swiegers/Getty Images)

Gordhan noted that it is also necessary for people to understand the theory of reform. “Reform has winners and losers. Reform processes attract support and resistance … and in every reform process of consequence, you’re going to find people with vested interest.” 

The minister likened the process of reforming the state-owned entities to wading through mud. “Do you know how much energy that takes? What pace does that involve? And do you know how many things you have got to fight in order to get to the other side.

“That is what this job is about. It requires resilience. It requires persistence. It requires a clear idea of where you want to go.”

On the future of his department in the wake of the resolution to move state-owned entities out of it, and why he hasn’t addressed it publicly, Gordhan said: “Our political discipline is of a different type, completely. It’s easy to make all those noises. Does it solve any problem? While we are here, we have got to do our work honestly, diligently and with integrity — and with urgency. That’s it.”

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