One of the most common lamentations about post-apartheid SA is that we have some of the best policy frameworks in the world, but fail miserably when it comes to implementation and delivery.
It applies to so many areas of daily life, but particularly to our economy, and more specifically to the purported use of infrastructure development projects to stimulate economic growth and create jobs.
To illustrate this, it’s useful to look at two infrastructure development projects recently initiated by the Passenger Rail Agency of SA (Prasa).
The first involves Swifambo, whose locomotive contract, worth R2.6-billion, is best known for the fact that the trains provided by its Spanish partners were too big to fit through South African railway tunnels.
The second involves Gibela, which is partnering with Alstom in a project worth R51-billion, and which has so far proved to be a great success.
Both projects were initiated by the same state-owned company, based on the same principle of using infrastructure development projects to stimulate economic growth and job-creation. Both are in line with the stated objectives of the National Development Plan (NDP) and are key components of the Department of Transport’s Rolling Fleet Stock Renewal Programme, which aims to create 65000 direct and indirect jobs.
Yet the contrast in outcomes is like chalk and cheese.
Let’s start with Swifambo. In July, the High Court in Johannesburg declared that its entire contract was corrupt. As a result, Swifambo’s owners were ordered to pay back every cent received from Prasa and to take back their unusable trains. It was a total disaster.
The judge said Swifambo was “nothing more than a willing and criminal front for the international rail partner, Vossloh España”.
He described Swifambo’s involvement as “a token participant … the company received monetary compensation in exchange for the use of its broad-based black economic empowerment (BBBEE) rating”.
The court ruled: “The relationship between Swifambo and Vossloh amounts to exploitation of ... black people as defined in the BBBEE Act … it is a criminal offence.”
The contract was awarded in 2013 in violation of the Public Finance Management Act, as it did not have the approval of the transport or finance ministers. Interestingly, the contract was signed off by former Prasa chairman Sfiso Buthelezi — the man who is now our deputy finance minister.
In contrast, the Alstom-Gibela project, in terms of which 3600 coaches are being built for Prasa at a cost of R51-billion, is more encouraging. According to reports, the first set of coaches is being built in Brazil, but the remainder will be built at a local factory in Nigel, creating thousands of jobs.
The indirect and induced tax contribution stimulated through the Gibela supply chain and economy amounts to R1.3-billion. Gibela’s direct contribution more than doubles through this contribution – and it will grow when local manufacture starts. When the direct, indirect and induced contributions are combined, the total contribution to public finances is R2.3-billion since Gibela began operating.
Over the life of the manufacturing contract, Gibela expects to spend about R30.9-billion on direct suppliers and employees. A further R23.8-billion will be spent in the South African economy at large on skills development. The total contribution to the South African GDP is about R72-billion, in addition to the value of the 600 new trains.
In the sphere of employment, there are 338 direct employees and there was indirect employment of 1600 people in 2016, plus 2700 jobs from induced effects across the economy. The jobs effect is expected to increase to 18800 when the factory is operating at full capacity.
Regarding employment equity, 85% of top and senior management are black employees, 99% of junior managers are black, as are 88% of employees at middle management level. And one of the most encouraging statistics is that 39% of employees at Gibela are black women.
Success stories such as Gibela’s are hard to find, while our newspapers are, sadly, replete with stories like that of Swifambo. They have almost become the stock in trade of a particular group of individuals clustered around the Gupta family, with Brian Molefe and Anoj Singh at the head of the pack.
Before they even got started at Eskom, Molefe and Singh were abusing Transnet’s locomotive procurement programme, in which the kickback to the Guptas was a huge R5.3-billion out of a total contract value of R18-billion, according to reports. For every R50-million locomotive Transnet bought from China South Rail, R10-million was diverted to an offshore company controlled by the Guptas.
As was the case with Swifambo, the China South Rail trains were useless: they were plagued with technical problems soon after they arrived in SA earlier in 2017 and were rendered unoperable.
The same problem had been experienced with the same trains in Namibia more than 10 years earlier.
The sad irony in all this, of course, is that many of the infrastructure development big-ticket items in question could have been built or assembled in South Africa, benefiting South African workers.
We have fine policies around infrastructure development – but without good governance, transparency, a commitment to ensuring these policies are complied with, we are actually abusing state resources. Rather than developing the economy and contributing to inclusive economic growth, we may in fact be doing nothing more than developing bad habits and shady tenderpreneurs, and encouraging looting of the public purse.
This is unjustifiable, but particularly so when our economy is in such dire straits. Investment in infrastructure is particularly critical during tough economic times, such as we have experienced over the past several years. The sad reality, though, is that the current feeding frenzy in state-owned companies is denying us the dividends of the sound policies we have.
Infrastructure development is, appropriately, a central pillar of the NDP. As it states: “Infrastructure is not just essential for faster economic growth and higher employment, it also promotes inclusive growth; providing citizens with the means to improve their own lives and boost their incomes. Infrastructure is essential to development.”
But the NDP is also very clear on what to do about the sort of situation we are facing today. For example, it proposes a tiered system of review for tenders, depending on their value, with differentiated safeguards and procedures. The NDP also proposes that tenders above a certain amount be reviewed by the auditor-general and parliament’s standing committee on public accounts, with public hearings to ensure oversight of the award process. When it comes to corruption, the NDP’s endgame is clear, and it is one we should all support: SA must develop a society with zero tolerance for corruption, in which citizens are able to hold their leaders to account.
For this to happen, as campaigns such as Save SA have long argued, leaders in government, business and civil society will have to conduct themselves with integrity and be held to high ethical standards. And sanctions will need to be applied impartially to those who betray public trust or break the law.
The NDP clearly states that by 2030 “the language in SA should have shifted from fighting corruption to increasing integrity. To achieve this, the nation has to commit to the values of the Constitution and engage as active, responsible citizens to achieve the vision of 2030”.
As an active and responsible citizen myself, it saddens and angers me, as it should everyone, when one considers the opportunity cost of the billions of rand of public funds that are being leaked, unproductively and unearned, into the coffers of Saxonwold, Nkandla, Dubai and other places.
Money is being stolen hand over fist, jobs are being lost and lives are being ruined. That is bad enough. But to make it worse, the rot at state-owned companies is robbing SA of so much potential economic growth, so many jobs and so much opportunity.
These state-owned companies have the potential to be among the greatest drivers of SA’s economic growth and job-creation. If run properly, the huge infrastructure development programmes at Transnet, South African Airways, Denel and countless other state-owned companies could kick-start the economy, revive dying sectors, revitalise decaying towns and communities and get thousands of South Africans back to work.
But for now, it seems, our state-owned companies are going to be nothing more than piggy-banks for the greedy. Just ask Molefe, Singh, Ben Ngubane, Eric Wood or Dudu Myeni. Or Lynne Brown, Malusi Gigaba – and Buthelezi.
Sipho Pityana is convener of Save SA and a patron of FutureSA. This is an edited version of the plenary address to the Annual Labour Law Conference held on Wednesday. It first appeared in Business Day.
Job-creation loses out to enrichment of the few
It applies to so many areas of daily life, but particularly to our economy, and more specifically to the purported use of infrastructure development projects to stimulate economic growth and create jobs.
To illustrate this, it’s useful to look at two infrastructure development projects recently initiated by the Passenger Rail Agency of SA (Prasa).
The first involves Swifambo, whose locomotive contract, worth R2.6-billion, is best known for the fact that the trains provided by its Spanish partners were too big to fit through South African railway tunnels.
The second involves Gibela, which is partnering with Alstom in a project worth R51-billion, and which has so far proved to be a great success.
Both projects were initiated by the same state-owned company, based on the same principle of using infrastructure development projects to stimulate economic growth and job-creation. Both are in line with the stated objectives of the National Development Plan (NDP) and are key components of the Department of Transport’s Rolling Fleet Stock Renewal Programme, which aims to create 65000 direct and indirect jobs.
Yet the contrast in outcomes is like chalk and cheese.
Let’s start with Swifambo. In July, the High Court in Johannesburg declared that its entire contract was corrupt. As a result, Swifambo’s owners were ordered to pay back every cent received from Prasa and to take back their unusable trains. It was a total disaster.
The judge said Swifambo was “nothing more than a willing and criminal front for the international rail partner, Vossloh España”.
He described Swifambo’s involvement as “a token participant … the company received monetary compensation in exchange for the use of its broad-based black economic empowerment (BBBEE) rating”.
The court ruled: “The relationship between Swifambo and Vossloh amounts to exploitation of ... black people as defined in the BBBEE Act … it is a criminal offence.”
The contract was awarded in 2013 in violation of the Public Finance Management Act, as it did not have the approval of the transport or finance ministers. Interestingly, the contract was signed off by former Prasa chairman Sfiso Buthelezi — the man who is now our deputy finance minister.
In contrast, the Alstom-Gibela project, in terms of which 3600 coaches are being built for Prasa at a cost of R51-billion, is more encouraging. According to reports, the first set of coaches is being built in Brazil, but the remainder will be built at a local factory in Nigel, creating thousands of jobs.
The indirect and induced tax contribution stimulated through the Gibela supply chain and economy amounts to R1.3-billion. Gibela’s direct contribution more than doubles through this contribution – and it will grow when local manufacture starts. When the direct, indirect and induced contributions are combined, the total contribution to public finances is R2.3-billion since Gibela began operating.
Over the life of the manufacturing contract, Gibela expects to spend about R30.9-billion on direct suppliers and employees. A further R23.8-billion will be spent in the South African economy at large on skills development. The total contribution to the South African GDP is about R72-billion, in addition to the value of the 600 new trains.
In the sphere of employment, there are 338 direct employees and there was indirect employment of 1600 people in 2016, plus 2700 jobs from induced effects across the economy. The jobs effect is expected to increase to 18800 when the factory is operating at full capacity.
Regarding employment equity, 85% of top and senior management are black employees, 99% of junior managers are black, as are 88% of employees at middle management level. And one of the most encouraging statistics is that 39% of employees at Gibela are black women.
Success stories such as Gibela’s are hard to find, while our newspapers are, sadly, replete with stories like that of Swifambo. They have almost become the stock in trade of a particular group of individuals clustered around the Gupta family, with Brian Molefe and Anoj Singh at the head of the pack.
Before they even got started at Eskom, Molefe and Singh were abusing Transnet’s locomotive procurement programme, in which the kickback to the Guptas was a huge R5.3-billion out of a total contract value of R18-billion, according to reports. For every R50-million locomotive Transnet bought from China South Rail, R10-million was diverted to an offshore company controlled by the Guptas.
As was the case with Swifambo, the China South Rail trains were useless: they were plagued with technical problems soon after they arrived in SA earlier in 2017 and were rendered unoperable.
The same problem had been experienced with the same trains in Namibia more than 10 years earlier.
The sad irony in all this, of course, is that many of the infrastructure development big-ticket items in question could have been built or assembled in South Africa, benefiting South African workers.
We have fine policies around infrastructure development – but without good governance, transparency, a commitment to ensuring these policies are complied with, we are actually abusing state resources. Rather than developing the economy and contributing to inclusive economic growth, we may in fact be doing nothing more than developing bad habits and shady tenderpreneurs, and encouraging looting of the public purse.
This is unjustifiable, but particularly so when our economy is in such dire straits. Investment in infrastructure is particularly critical during tough economic times, such as we have experienced over the past several years. The sad reality, though, is that the current feeding frenzy in state-owned companies is denying us the dividends of the sound policies we have.
Infrastructure development is, appropriately, a central pillar of the NDP. As it states: “Infrastructure is not just essential for faster economic growth and higher employment, it also promotes inclusive growth; providing citizens with the means to improve their own lives and boost their incomes. Infrastructure is essential to development.”
But the NDP is also very clear on what to do about the sort of situation we are facing today. For example, it proposes a tiered system of review for tenders, depending on their value, with differentiated safeguards and procedures. The NDP also proposes that tenders above a certain amount be reviewed by the auditor-general and parliament’s standing committee on public accounts, with public hearings to ensure oversight of the award process. When it comes to corruption, the NDP’s endgame is clear, and it is one we should all support: SA must develop a society with zero tolerance for corruption, in which citizens are able to hold their leaders to account.
For this to happen, as campaigns such as Save SA have long argued, leaders in government, business and civil society will have to conduct themselves with integrity and be held to high ethical standards. And sanctions will need to be applied impartially to those who betray public trust or break the law.
The NDP clearly states that by 2030 “the language in SA should have shifted from fighting corruption to increasing integrity. To achieve this, the nation has to commit to the values of the Constitution and engage as active, responsible citizens to achieve the vision of 2030”.
As an active and responsible citizen myself, it saddens and angers me, as it should everyone, when one considers the opportunity cost of the billions of rand of public funds that are being leaked, unproductively and unearned, into the coffers of Saxonwold, Nkandla, Dubai and other places.
Money is being stolen hand over fist, jobs are being lost and lives are being ruined. That is bad enough. But to make it worse, the rot at state-owned companies is robbing SA of so much potential economic growth, so many jobs and so much opportunity.
These state-owned companies have the potential to be among the greatest drivers of SA’s economic growth and job-creation. If run properly, the huge infrastructure development programmes at Transnet, South African Airways, Denel and countless other state-owned companies could kick-start the economy, revive dying sectors, revitalise decaying towns and communities and get thousands of South Africans back to work.
But for now, it seems, our state-owned companies are going to be nothing more than piggy-banks for the greedy. Just ask Molefe, Singh, Ben Ngubane, Eric Wood or Dudu Myeni. Or Lynne Brown, Malusi Gigaba – and Buthelezi.
Sipho Pityana is convener of Save SA and a patron of FutureSA. This is an edited version of the plenary address to the Annual Labour Law Conference held on Wednesday. It first appeared in Business Day.
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