Let’s keep government out of business

Mr Anil Sardana, CEO and MD of Tata Power, a company involved in the construction of two wind farms in South Africa was quoted in Business Day recently saying something truly startling: he said construction of Medupi and Kusile had started two years before Tata undertook a project of equal size in India which has been operating for several years already.

Medupi has had only one of its six units commissioned, the rest will take more years and Kusile is still several years away. The power station in India needed a quarter of the money spent on Medupi, said Mr Sardana.

What is the difference between the two projects? The Indian project, one of the largest power stations in the world, was carried out by a branch of one of India’s biggest private sector conglomerates. South Africa’s Eskom project is being run by a state owned entity that needs constant bail-outs from public funds. Eskom has rid itself of the technical expertise to run large projects and has to contract with international firms to do the work. They are in turn hardly at arms’ length in that the ANC, through its investment arm, Chancellor House, has a big finger in the pie, earning money for the party out of state projects.

If Tata’s project had failed to meet budget and time targets, Tata and its shareholders would have suffered the consequences.

Here, the government simply uses public money to bail out Eskom when it has to. The public too, and business and mining and industry in particular, have borne the consequences of the ‘load-shedding, ’ meaning power cuts. The unconscionable completion delays have led to power shortages directly impacting on South Africa’s economy, lowering the growth rate and increasing unemployment.

But never mind the billions of rand of consequential damages. What about the direct costs? Why should Medupi and Kusile cost four times as much as the similar Indian project? That is the first leg. Was it because of padded pricing in the first place so that the ANC could get its cut?

The second leg is the suspicion that penalties that could have been levied have not been because it would have hurt Chancellor House, whose task is to find the money to pay for the ANC’s next election.

In most democratic countries this would all look, sound and smell like corruption. When something smells corrupt, almost invariably it is.

Is there any case to be made out for a political party in government being heavily involved in business with the government? How can a government act in the public interest when this may conflict with its own financial interests as a political party? Even in the event that the apparent abuse of power and influence is not intended to be corrupt, it certainly has the appearance of corruption and undermines the reputation for integrity of the government. If a government appears to be corrupt it cannot be in the forefront of fighting corruption.

In my view, a Member of Parliament would do us all a huge service if she or he introduced a Private Member’s Bill outlawing any political party in receipt of public funds from engaging in business with government at national, provincial and local government levels. Another leg would be to use the opportunity to include in legislation an absolute prohibition on officials, at whatever level, carrying on business with government in their private capacities.

Party political and personal business interests are one side of the coin. Another is the ideology so fashionable in some circles that government in South Africa could and should play a developmental role. They are wrong.

Our government, our ministers and most officials are not capable of running a developmental state. They do not have the capacity to run businesses, mines and industries. This is not confined to South Africa. Most politicians and officials in the wealthy, developed, democratic world, recognise that the business of government is to govern, to regulate appropriately and to provide a favourable climate for business to get on with the job of operating business.

Regrettably, the default position of many of our rulers is that the more government directs and operates business the better. Despite every possible proof to the contrary, some in government carry on clinging to this fond notion.

Thus we have the pie-in –the sky notion that we can create a hundred industrialists by throwing billions at black business. Billions of Rands, mark you, that must come from the taxpayer and be squandered by the government for this purpose instead of being used, for example, to uplift millions of uneducated children or tens of thousands of underfunded university students, some of whom might in time become the industrialists and entrepreneurs we need.

These people do not understand how the market operates. We will spend all this money on making a handful of well-connected persons very rich and be fortunate indeed if we end up with any worthwhile industrialists who make things and sell things and provide employment for the unemployed.

Worse still is the government idea that the whole infrastructure building project that our country has been promising to tackle for years now will be used to further the ideological aims of the statists instead of providing for us the best possible infrastructure to serve all our people at the most competitive and lowest possible prices.

The same ideological fog has been very excited by the election of Mr Jeremy Corbyn, an old-style leftist as leader of Britain’s Labour Party. He was effusively welcomed by our very own COSATU who described him as the ‘‘most progressive leader ever elected by the Labour Party.”

Most sensible people know that if COSATU approves of Mr Corbyn, there must be a lot wrong with him.

It is past time for us to focus on economic ideas that work; that produce the goods; that foster growth. Let’s get government out of business.

Douglas Gibson is a former Opposition Chief Whip and a former ambassador to Thailand.

This article first appeared in The Star.