Reforming South Africa's Fat Cat Parastatals for Better Social Ends

By Saliem Fakir · 14 Jul 2010

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The average pay gap between Eskom’s top management and workers is 93% to 9%, but it’s the workers getting the flack for demanding more. A similar situation prevails in other parastatals.

The wage debate is pertinent after the World Cup has made us drink from the fountain of optimism about the potential for mutual solidarity.

But there will be little of it if workers and citizens feel, in general, that CEOs and managers of our parastatals earn excessively and have little to show for it other than the envy and disdain of others.

The annual review of compensation is a ritual that tells us how well knit the different players in an economy are and what the prospects are for social and political harmony. It is, in effect, the barometer of our social health.

Disparities in compensation can create the conditions for the disintegration of a public service ethos in its truest sense of the word. It does this by spreading the message within the top echelons of bureaucracy and state enterprises that self-enrichment will be shouted at, but not really checked.

All of this becomes more disparaging when one considers that right on the eve of the confirmation of the Presidential Review Commissioners, Eskom’s management decided to reward itself handsomely.

The general refrain would be that these bonuses and increases were long overdue. The same thing, Jacob Maroga, the former CEO of Eskom, said when he was granted his bonus.

Sure they will argue that all the proper board remuneration approvals have been followed and that these bonuses are in line with industry standards. If we want to keep our executives we must pay them.  But, the question is, is it moral?

An organisation’s ethos, especially the care and respect with which it treats the various contributors to its own economic welfare is represented through the nature of its compensation scheme.

An unequal compensation regime itself devalues the idea of a hard and committed work ethic. By this we mean going beyond the call of duty on behalf of the general citizenry.

The reason the compensation debate is important is that it tells us what kind of social order we are able to create.

The losers will neither be managers nor workers, but those members of society whose basic needs still need to be fulfilled. And, it is the duty of both workers and managers to create the conditions for wider employment for those disenfranchised by the economy at present.

Unequal compensation creates a dispensation of protracted negotiation between levels of effort and just compensation. Vast disparities will inevitably breed distrust and a lack of co-operation.

The discrepancy in wages between management and workers will itself leave an unsatisfactory situation. It’s already a source of unhappiness within the economy in general and its one of the reasons we see so many strikes.

Even though the National Union of Mineworkers (NUM) has agreed on a 9% increase, it is only the early salvo of a battle that is going to go unresolved until this disproportion of salary scales is brought to reasonable levels.

Labour conflict slows down economic progress in general and state parastatals are vital to the revival of the South African economy. But to achieve this there has to be a settlement on this issue.

Excessive CEO and management compensation starts a wage war. If CEOs and managers get a large bite of the cake, workers will want their share too, and not let go.

It raises fundamental questions about who is in control of our parastatals and what their economic and social roles should be?

With such generous salaries and bonuses on offer it is understandable why Siyabonga Gama is so desperate for the job at Transnet. It’s got something to do with public service, but the pomp of having a high-flying job and the perks that go with it also have their allure.

In these jobs, even if you don’t perform or fall out with the politicians, you can still be sure to get a golden handshake. This is how former SAA boss, Khaya Ngqula, CEO of the SABC Dali Mpofu, and many others went.

It’s not a case of win or lose -- you always win in these jobs.

Figures presented by the Economist, Mike Schussler, recently show that government wages in general are slowly outpacing that of the private sector.

For the 2006 period, government salary increases rose 53% compared to 49% in the private sector. Government’s salary spend is already 12% of GDP. It is one of the larger spends in comparison to international norms. 

All this feeding at the trough without a tangible dent on broader national unemployment cannot be sustainable.

The state is, in fact, sending a signal through these high perks that it is an easy target for self-enrichment. It further corrupts this culture if you consider the fact that state parastatals and government departments spent close to R130 million on World Cup soccer tickets. Eskom alone spent about R12 million.

This raises immediate questions about whether South Africa’s parastatals should take on a corporatist culture or be socialised to the extent that they are economic engines of the populace, rather than the prize of a managerial class.

This presumably will all be the subject of review undertaken by the Presidency as well as the separate sub-reviews taking place under the auspices of the Department of Public Enterprise.

The fact that state enterprises should have a social role goes without saying, but how to achieve that in the context of an entrenched corporatist culture in which the financialisation of performance becomes the measure rather than social impact is a shift that needs to be introduced.

But to perform these social functions on behalf of society the very culture of an organisation has to be transformed.

This unequal abyss of disproportional compensation for effort only spoils the ethos of work and sours the social character of the organisation from within as well as the society for which it is meant to have a socially beneficial relation.

The writer, Richard Sennett, in his book, Respect, argues that society shapes character in three ways: 1) through self-development by ensuring all those who live within its ambit are able to develop their intelligence, abilities and skills, 2) through the care of the self where individuals are not so ruined that they are unable to care for themselves and they become a nuisance to others in ways that make them face constant humiliation, and 3) and by being able to give back to others, the latter being only possible if the first two are satisfied.

Sennett’s yardsticks are useful when thinking of what we mean by the socialisation of parastatals – we don’t mean its material value so accumulated through its proficient use of resources in the market, we mean also its mindset and going the extra mile for building society as a whole.

Capitalist societies emphasise the gaining of something while more socialised societies underscore the giving away of something from the abundance of gain.

The giving itself - a more mature form of socialisation - is never matched on a one-to-one basis as one treats the act of commerce. It is always more than the sum total. Performance is measured by the proficiency to give more than what one takes and only in the end as a way of growing more. One does not just gain a bigger monetary value, but also respect and a healthier society.

Fakir is an independent writer based in Cape Town.

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