State owned enterprises shouldn't be used as pawns in South African politics

South Africa’s finance minister, Malusi Gigaba, has had to look towards selling off state owned assets to plug a fiscal hole.
REUTERS/Rogan Ward

State owned enterprises are vital to many economies, but are particularly vital to those seeking economic development.

This is true in South Africa too. Which makes it odd that the South African government – and much of the policy debate – never sees any value in trying to work out what role they should play in growth and development.

Finance Minister Malusi Gigaba’s interest in selling off government shares in telecommunications group Telkom, to bail out South African Airways is the latest example of a trend in which state owned enterprises are seen as useful pawns in government plans but not as national assets whose use should be thought through carefully.

The importance of South African state owned enterprises was spelled out in a 2015 Organisation for Economic Cooperation and Development policy brief. It estimated that their revenues correspond to 8.7% of the country’s gross domestic product. They also, it found, play a vital role in providing services:

The population’s access to water, electricity, sanitation and transportation is almost entirely dependent on the state, operating through corporate vehicles. They are concentrated in strategic sectors – infrastructure, transport, energy and water – and are “among the main sources of employment” in cities.

The Organisation for Economic Cooperation and Development might also have mentioned that State owned enterprises are also a key source of racial change. According to the 2016/17 report of the Commission for Employment Equity, black people occupy just under 75% of top management jobs in state owned enterprises – black Africans 57%. In the private sector, the figure is 24.5 % - only 10.8% are black African.

Given this, one might expect that the government would make it a priority to work out what the most appropriate role for parastatals is in the economy’s development. But it isn’t a priority – nor has it ever been.

Rule of short termism

State owned enterprises have been seen as a route to private investment, enrichment for the connected or a site for political battles but never as a key element in the development mix.

In fairness, private interests have shown no great interest in debating the role of state owned enterprises either. They have preferred taking sweeping positions for or against privatisation. But, given state owned enterprise’s role in governance, government should take the lead in thinking through what State owned enterprises should do.

The reality is different. Gigaba’s interest in selling off government holdings in state owned enterprises has much more to do with pressures for patronage than placing privatisation back on the agenda some 15 years after president Thabo Mbeki was forced to ditch it. It would be a strange turn if appeasing demands for public money revives a market friendly option which Mbeki had to abandon. And it certainly would not suggest a government committed to finding a development role for state owned enterprises.

It seems that the Mbeki government wanted to sell off shares in state owned enterprises not because it had a considered view that this would achieve the goals parastatals were designed to serve. The motive, rather, seemed to be to enhance private investor confidence and state revenues. Many might support these goals. But neither has to do with a long-term view on the contribution these enterprises could make to the economy.

A balancing act

Nor has Gigaba revived privatisation because he and his advisors have thought through the role for state owned enterprises which his predecessors ignored. He is, rather, trying to balance the two pressures he has faced since he became minister earlier this year.

On the one hand, he does not want to become the latest finance minister to face pressure for not giving a state owned enterprise what it needs. On the other, he does not want to preside over a second round of rating downgrades because he spent money the government did not have. The only way to square the circle is to sell off shares in one state owned enterprise (Telkom) to pay for the bailout in another, South African Airways. The government’s stake in Telkom is over 39%.

It’s hard to see how this strategy is sustainable. The South African Airways bailout request will not be the last. And it’s clearly not workable to keep on selling off national assets whenever state owned enterprises want cash injections.

Nor is this likely to protect the minister from political flak. There is sure to be principled opposition to the strategy and patronage politicians will also notice that the prospective piggy bank is being sold off and will rebel.

But even if Gigaba does manage to bring off the trick, it’s obvious that this move has everything to do with balancing political pressures and nothing to do with a development strategy.

Between Mbeki’s strategic retreat and Gigaba’s strategic balancing act, state owned enterprises have not been quiet backwaters. They have been, and still are, key battlegrounds in the war between the ruling party factions as officials and politicians in its patronage group try to turn them into vehicles for making deals and accumulating goodies while their opponents try to stop them.

Lately, this battle has been played out in parliament – first over the South African Broadcasting Corporation, now over state owned power utility Eskom. South African Airways has been a battleground throughout and other state owned enterprises have been quieter sites of conflict.

Economy pays the price

This trench warfare, in which both factions seeking control of the ANC make gains after pitched battles but neither ever wins the war, may shape the future of the ANC and government’s role in the economy. But again, the issue here is a political fight for power, not considered positions on the role of state owned enterprises.

The economy pays an obvious price for this failure to care about their development role – missed opportunities for growth and the exclusion of many who go without wages and salaries. But, given the factionalised nature of politics, which is likely to continue, it is unrealistic to expect serious thinking from the politicians on the role that state owned enterprises can play in growth and inclusion.

This makes it urgent that private interests take this issue much more seriously, replacing the stereotyped debate with considered proposals for change. State owned enterprises are too important to be relegated to pieces on a chessboard. But nothing is likely to change until everyone with an interest in the economy’s future develops ideas on how state owned enterprises fit in and presses politicians to take notice.

Steven Friedman, Professor of Political Studies, University of Johannesburg

This article was originally published on The Conversation.

Cape Town taxi drivers’ strike marred by violence - PHOTOS

Strike called off after MEC intervenes

By Peter Luhanga, Tariro Washinyira, Yann Macherez, Mary-Anne Gontsana and Sune Payne
18 September 2017

Police on Japhta K. Masemola Road look for protesters involved in the burning of this vehicle. Photo: Yann Macherez

There was violence across Cape Town on Monday as taxi drivers went on strike. Several people were injured, buses were stoned and some were set alight. By the afternoon, the strike had been called off.
The strike affected a wide area including Khayelitsha, Philippi, Mitchells Plain, Gugulethu, Kraaifontein, Nyanga, Fisantekraal, Wynberg, Delft and Dunoon, leaving commuters stranded.

Councillor Brett Herron, Mayoral Committee Member for Transport and Urban Development, said two passengers, one of them pregnant, were injured when a MyCiTi bus was stoned in Khayelitsha.
“One of the commuters was hit in the face by a flying rock and a pregnant commuter fell during the violent attack near the Kuyasa stop.” Both women had been admitted to hospital, he said.

As he was leaving Nyanga, Ross Lewis’s car was stoned. He was injured on the head. He drove himself to hospital. Photo: Yann Macherez

MyCiTi buses were stoned in Dunoon, Mfuleni and Khayelitsha; and one bus was set alight and burnt out on the N2 highway under the Symphony Way bridge, Herron said.

The MEC for social development Albert Fritz said the car of a social worker travelling to Kraaifontein had been stoned. The social worker had been injured and was being treated in hospital, he said.

When GroundUp went to Nyanga, some residents were burning tyres and blocking Govan Mbeki road, stopping cars. Police were present but parked their vehicles about 500 metres away from the protest.

There were no minibus taxis operating and only two Golden Arrow buses when GroundUp was there.
A Delft taxi driver who did not want to be named said drivers had heard about the strike on Friday afternoon. He said it severely affected his income. “For us it’s no work, no pay,” he said. “What happens to us, if things turn violent? Safety first. It’s our lives that are in danger.”

Zanele Njokwana was desperately looking for a bus to go to the city centre. Monday was the last day for her to deposit the death registration form for her late boyfriend. Photo: Yann Macherez

In Wynberg, a group of pupils from Wittebome High School were walking back to Khayelitsha at 2pm. They said they had bus tickets but had been waiting for a bus since noon.

Achmat Dyason, spokesperson for the Provincial Minibus Taxi Task Team, told GroundUp in Wynberg that taxi operators were dissatisfied with the current leaders of the SA National Taxi Council (Santaco) and did not want the provincial government to recognise them.

He said the strike had been suspended after a meeting with the MEC.

“We are not happy with the process that has begun a year ago about the Santaco leadership. We had agreed that elections have to be free and fair. We have a constitution in place which actually allows the people to hold accountable the leaders they elect, but the outgoing committee is not accountable.”
“Their leadership term expired in March this year and we are operating in a vacuum.”

Dyason said taxi operators no longer wanted the provincial government to consult the leadership of Santaco, which, he said, had become distanced from members. “We reached an agreement with the MEC. He recommended that a retired judge be nominated to look into our grievances. In two weeks the MEC’s office will give us feedback.”

Leaving Delft, this bus driver showed his broken windows to the police. Photo: Yann Macherez

The deputy chairman of Santaco in the Western Cape, Nazeem Abdurahman, said the strike was a “ploy to discredit Santaco leadership on the eve of the November Santaco elections.

He said the leaders of the strike in Cape Town did not want to use proper channels to address their grievances. “Associations that did not operate were scared for their safety and passengers’ safety as well as their gatjies’ safety. This is a volatile industry.”

“We condemn any violence that emanated from this strike and want government to deal with the offenders,” he said.

In a statement, MEC Donald Grant, said he had met the task team and Santaco and the task team had agreed to a mediation process to be facilitated by the Department of Transport and Public Works, and run by someone “with a legal background”. He condemned the violence.

Long day for commuters

By 7:30am commuters in Delft, who had been waiting for taxis, either went home or walked to Unibell and Pentech train stations, a five-kilometre trek from home for some of them.

Other commuters decided to take the bus. One commuter told GroundUp she had waited from 7:30am. By 8:30am people started informing their bosses they would not make it to work or they would be late. Others left for home, with some saying that they needed to get to work because they needed the overtime or had been absent from work and wanted to catch up on their workloads. By 9am, the bus still hadn’t come.

People waiting for the bus heard that a Golden Arrow bus was set alight in another part of Delft. They were worried about the driver of the 8:05am bus to Cape Town, who is a woman. “What about her? Will she be safe?” asked one commuter.

Several stores were vandalised in the morning on Japhta K. Masemola Road. Photo: Yann Macherez

At about 9:50am a MyCiTi bus from Khayelitsha was stoned and set alight.

One of the passengers, Nobesuthu Beya, who was on her way to work in Observatory, said she boarded a MyCiTi bus when she found that the Golden Arrow buses were not working.

“I managed to get a MyCiTi in Ekuphumleni. I noticed that it took a different route out of Khayelitsha, but we ended up on the N2 to town. When we got to the bridge before Borcherd’s Quarry, a number of people were standing on the bridge. As we got closer, they started throwing bricks at the bus,” said Beya.

Beya said the bus driver pulled over and the passengers got out and started running. Two men in balaclavas ran to the bus and set it alight. “I was petrified. The bus burnt quickly,” said Beya.
She and others started walking back to Khayelitsha on the N2, but managed to get a lift in a Metro police van which dropped them in Mew Way. From Mew Way she hitchhiked home.

Protesters erected burning barricades in Dunoon. Photo: Peter Luhanga

In Dunoon, police fired rubber bullets and teargas to disperse a crowd that was pelting private cars with stones and setting alight tyres on Potsdam Road and along the N7.

Taxi drivers working for the Dunoon Taxi Association (DTA) prevented scholar transport from reaching the township and prevented MyCiTi bus drivers from leaving the bus depot, leaving commuters stranded.

Hundreds of commuters resorted to walking about five kilometres to catch MyCiTi buses at the Golden Arrow bus terminus, where the buses were making a U-turn avoiding Dunoon.

In Dunoon, tyres were set alight near the taxi rank, while taxi drivers sat in their parked vehicles.
Somali spaza shop owners locked themselves inside their closed shops.

A police officer shoots rubber bullets at a resident of Brown’s Farm, Philippi. Photo: Yann Macherez 

Desmond Nobuntu, DTA spokesman, said the drivers had joined the strike in solidarity with other taxi associations.

He complained about impoundment of taxis, problems with operating permits and problems with the MyCiTi bus service “taking over our business”.

“We currently have more than 100 taxis without permits. People are forced to go to MyCiTi whereas they prefer taxis.”

He said that ten Dunoon taxis had been impounded by the City and that fines ranged from R7,000 for a first offence to R21,000 for the fourth. “This was more reason for us to join the strike,” he said.

There was also a spat between city councillor Khaya Yozi, the member for ward 39, and JP Smith, the City’s Mayco Member for Safety and Security.

Yozi accused the City of refusing to deploy Metro police in Nyanga and Khayelitsha to assist SAPS. Smith said this was false, that he had confirmed that Metro police had been deployed in these areas and had responded to incidents. He indicated that he would be laying a complaint against Yozi in terms of the City’s Code of Conduct of Councillors.

This bus on the N2 was completely burnt out. Photo: Yann Macharez

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Published originally on GroundUp .

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What is a fair price for expropriated land?

Supreme Court of Appeal has to decide hotly contested issue

By Ohene Yaw Ampofo-Anti
18 September 2017

The Supreme Court of Appeal in Bloemfontein has to decide what a fair price is for the state to pay when it expropriates land. Photo: Ben Bezuidenhout via <a href="https://commons.wikimedia.org/wiki/File:High_Court,_Bloemfontein,_South_Africa.JPG">Wikimedia </a>(CC BY-SA 4.0)

Can landowners be compensated less than the market value for their land when it is expropriated for their labour tenants? This question came before the Supreme Court of Appeal (SCA) on 1 September.
Labour tenants work for farmers in exchange for the right to live on the farm. During apartheid this system was used to deprive black workers of land rights. The Land Reform (Labour Tenants) Act attempts to redress this inequity.

The Act enables labour tenants to acquire land they worked on as labourers from their former employers (landowners) through the state expropriating land from landowners. Essentially, the state facilitates the transfer of the land to the labour tenant by expropriating the land from the landowner and providing compensation to the landowner in return.

The case concerned the Msiza family’s attempts to own land in Rondebosch, Cape Town. Amos Msiza began working on the land in 1936 and worked for approximately 67 years. In 1996, Msiza lodged a claim for land under the Act. In 2004, the Land Claims Court (LCC) upheld his application and ordered that he be awarded a certain portion of the land.

However, the state and the landowners were unable to agree on  the amount of compensation to be awarded to the landowners. The decision was left to the Land Claims Court. It found that an amount of R1.5 million would constitute just and equitable compensation.

During the proceedings the LCC found that the correct market value of the land as determined by the agricultural use of the land was R1.8 million. Therefore the award made by the LCC was at least 16.6% less than the market value of the property. Ordinarily, when determining the amount of compensation to be awarded, the LCC makes use of the so-called two-step approach. According to this approach, a court must first determine the market value and then proceed to adjust this amount according to the other factors listed in the property clause. The LCC found, however, that in land reform cases it may be justifiable to award less than the market value of the property. The landowners appealed against this decision in the SCA.

The key issue is what constitutes just and equitable compensation for expropriation under the Constitution. Section 25 of the Constitution provides guidance using several factors including market value, the history of the acquisition of the property and the current use of the property. The particular point of contention was how the market value of the land should be determined and how much emphasis should be placed on this value.

The landowners contended that the market value of the property should be determined by its potential as a township development. However, the land is presently used for agricultural purposes. If the township development option is used as the basis for market value then the landowners are at least entitled to R4.6 million.

The landowners accepted that market value alone cannot be the sole factor to determine the amount of compensation to be awarded. However, they argued that in this particular case, there is insufficient evidence before the court to award less than the market value as compensation. Most notably, the owners argued that courts should not “over-emphasise the role of land reform” when calculating compensation.

Agri SA, a federation of agricultural associations, also made submissions to the SCA as a “friend of the court”. In strong criticism of the LCC’s decision, Agri SA argued that market value is the only factor in the Constitution’s property clause that can be used to obtain a numerical value for the price of land. Other factors, such as the historical acquisition of the land or the purpose of the expropriation, cannot be given objective values and should therefore be given less weight.

Agri SA was also concerned that an award of less than market value might make it harder for farmers to get financing. This would possibly drive them out of business and damage the agricultural sector and, in turn, food security.

The Msiza family, represented by the Legal Resources Centre, argued that the award of compensation should be about striking a fair balance between the constitutional promise of land reform and the private interests of landowners.

The LRC criticised the two-step approach on the grounds that, if market value is the main concern, this can undermine efforts to speed up land reform. It argued that the correct approach would be to rather let the transformative purpose of land reform play a central role in determining what is just and equitable compensation.

Also, the LRC pointed out that if one compares the price the landowners paid for the land when they bought it with the amount they are being awarded, they will make a significant amount of profit. And, the LRC argued, compensation should not be a profit-making exercise that depletes scarce state resources.

It will now be up to the SCA to decide how compensation should be determined and how much emphasis should be placed on the market value of the land. The case has far-reaching implications given the approximately 11,000 land claims still awaiting adjudication.

In making its decision, the SCA has to attempt to strike a fair balance between the constitutional objective of land reform on the one hand and the need to compensate landowners for the loss of their property on the other. All of this has to take into account a historical legacy of unequal land ownership which has been insufficiently changed, 23 years into democracy.

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Published originally on GroundUp .

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Protest at Soweto school engulfed in race tensions

Exams disrupted as parents prevent teachers from entering school

By Ihsaan Haffejee
18 September 2017

Learners leave Klipspruit West High School at home time. No exams were written as protesters blocked some teachers from entering the premises. Photo: Ihsaan Haffejee

Examinations were cancelled for students at Klipspruit West Secondary High School in Soweto as a small group of parents protested outside the main gates on Monday. The parents called for the removal of three teachers and a general worker. The protesters, who under the banner of Patriots for Equality, accused the teachers and the worker of abusing, assaulting and insulting coloured children at the school.

The protesting parents blockaded the school entrance in the morning and refused to allow the teachers they have a grievance against to enter the premises. The teachers that were denied entry were then joined outside by other black African staff members in solidarity and proceeded to leave the school in a convoy of cars.

By the time the situation had calmed down eleven teachers had left the school. Three left because they were denied entry and the others left in solidarity with their colleagues.

One of the teachers who had been denied entry spoke anonymously, saying that the accusations levelled against them were “all lies” and that their main concern was just to oversee the preliminary examinations which were underway.

This latest protest at the school comes as learners are in the middle of exams. Exams for the day were cancelled for grades 8 to 11. GroundUp observed some students leave the school in the morning through the broken back fence as no classes were taking place inside.

The embattled school has been in the news in recent months as parents, educators and the department continue to clash over a variety of issues. The only reason the matric exams were not disrupted was because the venue for their trial exams had been moved to a nearby primary school due to the recent tensions at the high school.

Last month a bus was torched and the school shut down as protesters – in what is a predominantly a coloured area – took to the streets after a black African principal was appointed.

Protesters rejected claims of racism, claiming that the process used to appoint the principal was flawed as there were already more suitable coloured candidates that were overlooked. They blamed the South African Democratic Teachers Union (SADTU) for pushing an agenda that discriminates against coloured people.

But Desmond Luvhengo, chairperson of SADTU in Eldorado Park, said that the protesters were just causing trouble and that most of them did not even have any children at the school.

Following the previous protest, MEC for Education Panyaza Lesufi met with the aggrieved parents. He appointed a temporary principal and agreed to investigate the various grievances.

Anthony Phillip Williams, a protest leader, said they embarked on a disruptive protest because their grievances are being ignored by the authorities in the Gauteng Department of Education. He accused the department of failing to honour agreements made between the community and the department. “The principal today is not the main issue. The main issue is four teachers in particular who continue to violate their code of conduct,” said Williams. He went on to accuse the teachers in question of abusing children verbally and physically.

Williams once again denied accusations of racism stating that some of the accused teachers that they want removed are coloured men. “Some of these teachers come to school drunk and sleep in their cars the whole day. This is not fair on our kids. These kids are our future; they deserve better than this,” he said. He said that a grievance on teacher conduct was lodged with the department head but they have yet to receive any feedback.

Two metro police vehicles were at the school but then left as no incidents were reported.

As the bell rang for the end of the school day, learners streamed out of the main gates. One grade 11 learner just shrugged his shoulders when questioned as to how he felt about his delayed exams. “We didn’t do much today. We were supposed to write Business Economics but we just ended up playing around the entire day. I’m really not sure what’s going on or when we will write the exam,” he said.

Gauteng education department spokesperson Steve Mabona described the current situation at Klipspruit West Secondary High School as sad. He said that the head of department had received the grievances of the community, but needed time and space to conduct his work and investigations into the matter. He lamented the fact that learners were forced to delay their exams and indicated that the community protesters were just being impatient. 

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Published originally on GroundUp .

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Mayhem in Hangberg after Deputy Minister of Police cancels imbizo

Construction vehicle burnt as residents and police clash

By Ashleigh Furlong, Nomfundo Xolo, Denise Patterson and Sune Payne
14 September 2017

A construction vehicle burns in Hout Bay on Thursday. Photo: Nomfundo Xolo

Violence continued in Hangberg on Thursday, as dozens of residents protested over the allocation of fishing quotas.

The Deputy Minister of Police Bongani Mkongi had agreed to an imbizo with the community, but the meeting was cancelled. No public reason has been given for the cancellation, and this article was written after work hours so GroundUp has not yet been able to ask for comment from the minister. After hearing of the cancellation, protesters set a construction vehicle alight. Some protesters said that they would continue burning things until they were addressed by a minister.

As the situation escalated, protesters taunted police with stones, while the police responded with teargas. Tyres were set alight and petrol bombs were lobbed at the police. Crowds of residents from Hangberg stood outside their homes, watching the chaos unfold.

A man stands with a petrol bomb, while a dog watches petrol proceedings. Photo: Nomfundo Xolo

After about two hours the construction vehicle had been almost completely stripped for scrap metal.
One woman said that the protest was about more than fishing rights, and that there was also an issue with land in the area and that they wanted proper houses to be built.
Another man said that a portion of land in the area had been bought by a private individual and that the community wanted that land to be used for housing. He was possibly referring to a new housing development opposite Hangberg.

Residents GroundUp spoke to stressed that their protests did not start off violently. They mentioned attempts to get a response from the Deputy Minister of Police and being avoided. They said that they had to resort to violence to invoke a response.

Residents threw petrol bombs, while police used teargas. Video: Ashleigh Furlong

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Published originally on GroundUp .

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