BLSA CEO’s weekly – 22 June
POSTED ON: June 22, 2020 IN BLSA CEO's Weekly, Infrastructure, SOEs by Admin
By Busi Mavuso
We applaud the NPA for the arrests of suspects linked to the looting of VBS Bank and offer our full support as it pursues justice.
We all have been waiting patiently for Shamila Batohi, the national director of public prosecutions, to start the desperately needed process of arresting, charging and obtaining convictions for those involved in state capture. I was greatly encouraged last week when seven individuals connected to the VBS Mutual Bank saga were arrested and charged. An eighth suspect is under Covid-19 quarantine. We now need speedy convictions and to quickly move on to the long list of others who must face justice.
The undermining of the rule of law by the state capture brigade is one of its most damaging legacies. Batohi has had to effectively rebuild the National Prosecution Authority after the institution was steadily undermined for almost a decade through the appointment of supplicants.
BLSA has strongly campaigned for the enforcement of laws and elimination of corruption. Many in the private sector were also involved. Among those charged last week is an audit partner from KPMG and two representatives on the board of the bank from the Public Investment Corporation. KPMG was one of several companies suspended from membership of BLSA in 2017 because of involvement in matters related to state capture, while the PIC has been examined by a judicial commission of inquiry and wide-ranging improvements to its governance were recommended. KPMG was readmitted to BLSA following an overhaul of the leadership and culture of the business in SA.
We have campaigned widely for a greater commitment to ethical practices in companies while working with government to improve capacity. Business Against Crime South Africa, a division of BLSA, works tirelessly to ensure that business keeps its own house in order while supporting government in its anti-crime efforts across the criminal justice system. We also partnered with the Gordon Institute of Business Science to launch the GIBS Ethics Barometer to drive more ethical behaviour in companies.
The economy cannot function without effective enforcement of laws. Business depends fundamentally on certainty about its rights and obligations, and on effective government. Without these, the costs of doing business are far higher, with counterparts having to manage uncertainty about each other’s behaviour and find alternatives to public services. Law and order are a fundamental prerequisite to the economic growth we desperately need in South Africa.
Many businesses actively fought state capture. Many filed reports to the police whenever they came across corruption in terms of the Prevention and Combating of Corrupt Activities Act. All too often, however, no action was taken in response to these reports.
I am well aware that businesspeople often enabled corruption. Opportunism is ever present. When legal enforcement is perceived as weak and inconsistently applied, some will try and take advantage. VBS looks like one of those examples – it was periphery to the core state capture project of creaming margins off state procurement, but borrowed many of the same tools including inducing those meant to protect public money into handing it over to the bank where it was then stolen. In the absence of an effective financial crime investigation and prosecution regime at the time, those involved clearly thought they could get away with it. It is positive that this is now being proved wrong. The NPA needs to mount an effective case and win convictions so the public can clearly see the consequences of corruption.
More arrests are obviously needed. Those may include others connected to the VBS saga – we know from Advocate Terry Motau’s forensic report on the bank’s collapse that many enabled and benefited from the corruption. But there are other matters that are even more important. Government and its state-owned enterprises became sites of a feeding frenzy during the state capture years. We know many of the details thanks to the Zondo Commission as well as much brave investigative journalism then and now. We are well into the process of rebuilding from that crisis, but we cannot complete the task while those who aided and abetted the destruction of much of the public sector are still at large. We applaud the NPA for the steps it has taken last week and offer our full support as it pursues justice.
I am looking forward to the Sustainable Infrastructure Development Symposium (SIDS) that will be held tomorrow through a virtual conference. The event will present the work of the presidency and its Infrastructure Investment Office on building a pipeline of infrastructure investment that will be an important part of driving the recovery post this crisis. It has built this in consultation with many private sector counterparts.
The president has said that the key to unlocking far greater infrastructure investment is to unite the private sector and government in driving greater volumes of investment. I strongly welcome this intention and hope that we can make progress to delivering it through the SIDS. The private sector is a capable and willing partner in infrastructure investment. The possibilities were clearly shown by the renewable energy independent power producers’ programme that led to more than R200bn of private sector investment in the first half of the last decade. It is not just the financing that matters though – the private sector can be effective partners in building, operating and maintaining assets to ensure high quality and efficient services can be provided to the public.
For this to be unlocked, it is critical that the right framework is established for partnerships. These need to ensure that risks are appropriately shared between the public and private sectors. Infrastructure projects are long term by nature, which it makes it especially important that reliable and comprehensive agreements and contracts can apply. Government has to lead this process with highly competent technical capabilities that can deliver bankable projects. I fully support its efforts to do this and stand ready to work with government to realise a vision of a boom in new infrastructure investment.
BLSA wrote an open letter to the new SOE council last week, noting that SOEs are expected both to facilitate the economy to create jobs and wealth while delivering direct outcomes. Trade-offs will be necessary. With SOEs that cannot be rescued, private sector alternatives should be considered. This leads to the issue of when it is appropriate for the state to provide goods and services and when the private sector should do so. We urge the new SOE council members to be wary of being side tracked by various vested interests and elements within and outside government – and work for what’s best for South Africa. We will support government in addressing problematic SOEs. We stand ready to invest, create jobs, fund the economic recovery post the Covid-19 crisis and help society to flourish. Read the full letter here.
The government’s plans to keep SAA going bring to mind what famed entrepreneur Richard Branson, owner of Virgin Air, recently said in a Financial Times piece: How do you become a millionaire? Start as a billionaire and buy an airline.
To keep the airline going, National Treasury may be called upon to inject R10.3bn into SAA to allow it to exit business rescue. In order to be sustainable, it may need much more than this. This comes on top of the R16.4bn that the government has already committed to pay off guaranteed creditors. If the state had an investment committee tasked with funding projects that could get the economy growing, for its own credibility it could never sanction a R10bn cheque for #SAA, I wrote in my Business Report column.
Talk of restructuring SOEs always ignites the age-old ideological debate about privatisation in the governing party and its alliance organisations. In days of old, we could perhaps give attention to these theoretical debates, but the Covid-19 pandemic has brought a sense of urgency to this matter. There are some positive signs from government, however. The first, as I wrote in Business Day, is the rationalisation of three state oil and gas companies into one, the National Petroleum Company. The second relates to Eskom’s restructuring, which we are told is under way, while another positive sign is establishing the SOE Presidential Council, which I hope provides effective impetus to the restructuring of our ailing SOEs.
Have your say.
Share your opinion