JOTTINGS FROM JOHANNESBURG
Freemarket hypocrisy
Published: 28-SEP-04
By Benedicta Dube
How Bizarre! Western governments and their financial machinery, the IMF and the World Bank, continuously pester African nations to strive for sound economic policies. That means, amongst others issues, economic reform, greater productivity and competitiveness, privatisation and transparency. These are apparently the prerequisite instruments for attracting greater foreign direct investment (FDI), which in return boosts a country’s economy.
Rodrigo De Rato, the new chief of the International Monetary Fund reinforced these principles during his recent visit to South Africa. After lauding South Africa for "staying the course" and "prudently managing the budget", he told his audience, "…Faster growth calls for strengthening your country’s ability to attract investment by continuing efforts to improve productivity and competitiveness".
How nice! But then how do you explain that, in the same week that De Rato
pontificated about what’s economically prudent and not, US-based group SBC Communications, one of the single largest investors in the state-owned telecommunications operator Telkom, hinted that they may exit the market next year? The reason is that the government is finally doing away with that nemesis that is often blamed for poor FDI in developing economies – monopoly!
South Africa’s sole fixed line operator Telkom, where SBC owns a 9% stake worth about R3.85b, will have competition by next February, if all goes according to plan.
The liberalisation will not come too soon for ordinary South Africans, who have been subjected to inept customer service, exorbitant monthly subscriptions and vulgar performance bonuses and salaries for senior Telkom executives. It would mean that by this time next year, hundreds of private telecoms operators will be allowed to offer services that are currently hogged by Telkom. These include long distance data and voice calls over the
internet.
Well, SBC does not seem particularly impressed by this prospect. Shaun McKenzie, SBC's executive seconded to Telkom as Chief Operating Officer, was recently quoted as saying that his company would consider pulling out if a liberal fixed-line telecoms market would result in lower profits for Telkom. "If it is seriously detrimental to our business we would exit from SA, but I can’t think of many situations where Telkom would not be able to compete".
Excuse me but I have to ask what’s the idea of competition, if foreign investors in Africa cannot take the heat? If this is not hypocrisy then I don’t know what is, given the fact that over the past five years Telkom has more than just pleased the markets. It has shed almost a third of its workforce in the name of efficiency, and ended 2003 as one of the top performers on the JSE Securities Exchange, following a hyped up listing in 2003.
One company that will take a while before moving towards being a
top performer is South African Airways and its holding entity, the state-owned group Transnet.
After releasing terribly embarrassing and depressing numbers, Transnet's newly appointed CEO Mario Ramos seems to be on a purging spree. In September, Alec Erwin, her political boss as minister of public enterprises, took the lead by firing the entire board of SAA and Transnet and replacing them with what seems to be new and energetic blood. Ramos followed by sounding a warning that she would not tolerate laziness and incompetence from her senior executives. She expects them to be available all the time and tirelessly work on turning the company around. The statement bears all the hallmarks of a "new broom sweeps clean". Whether she will successfully pull Transnet out of the gutter, the jury is still out on that one.
That said, I’m not in the least impressed that SAA invited some of us for an experience extraordinaire to launch their new Airbus fleet of aircrafts, and
then decided to cancel the event because of poor results.
The offending e-mail was something to the effect "Dear Valued Customer…South African Airways is going through a difficult time following its end of year results…". Blah blah blah. Well, two things. First, I’m certain that SAA’s management knew at the beginning of the year that their results were likely to be as pathetic as the previous year’s. So then, why raise people’s hopes only to dash them at the last minute?
Secondly, former CEO Andre Viljoen walked off with a golden handshake of just under R4m. Surely, given the fact that he was leaving the company in a mess, they could have asked him to make a generous donation from his handout to the occasion. Ok, maybe that's pushing it a bit. Perhaps Coleman Andrews could have paid for the spectacle. That flamboyant American, who launched SAA’s downward spiral, walked off with a fat package totalling R99.8m, a share payout of R58.6m and a termination package of
R73.8m. Surely he could have donated a few hundred thousand dollars towards this "worthy course" in the spirit of "the people shall share". And good corporate governance of course!
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