Our SOEs: Lurching from disaster to disaster

Michael Bagraim we are in the unsustainable situation where over-staffed organisations also pay highest salaries


We now know that Eskom employs about 15 000 more people than it did 10 years ago to generate and sell the same amount of electricity, but the real situation is much worse for the World Bank study found it was overstaffed by 66%.

The question we must now ask is how many other state-owned enterprises, public service departments and municipalities are similarly over staffed and what does this cost the country?

We know that money-burning SAA is overstaffed because we can compare the number of employees per aircraft with matching figures or other airlines. SAA always comes out bottom of the list, except possibly for Air India. We can compare Eskom with other utility companies because we can boil down the figures to the amount of electricity generated per employee. Unfortunately, it is not possible to compare government departments or municipalities because they don’t produce standard products, but there are some things we do know and it’s not a happy picture.

Since the advent of personal computers most organisations have found that they can get by with fewer people. What happened to all those stenographers, the typing pool, messengers, clerks, tellers or cashiers now that we have e-mail and electronic funds transfers? In the case of municipalities, the use of pre-payment meters for electricity and water means that no meter readers are needed, there are no accounts and the money flows via the corner shop and EFT’s.

Companies which do a great deal of administration have been able to halve staff numbers. Why didn’t this happen at Eskom, the municipalities and in the public service? Instead the evidence is that they have all grown staff numbers while their work load was shrinking.

One of the reasons is that the trade unions have protected jobs fiercely and so far no SOE, municipality or government department has had the courage to stand up to them.

This has left us with the unsustainable situation where over-staffed organisations also pay the highest salaries. The average salary at Eskom, for instance, is R700 000 a year and they want more, despite the provable poor productivity.

What happens when there are more than enough people to do the work? Is the work spread around so that each person has less to do and more time to do it? This would reduce the pressure to perform and, without pressure, there is no incentive to find better and more efficient ways to do things. There is even time to play computer games and surf the internet. Bad habits set in and the organisations become slack and lethargic.

Then there is the Parkinson effect. You remember the law - work expands to fill the time available for its completion. Actually it is not the work expanding but a slower working rate makes the job look bigger so more help is required. And when the urgency disappears there is time to get a second and third opinion and if there is no agreement the various options have to be argued out, memos written and then the job is passed on to a more senior official for a final decision. Over-staffed organisations become inefficient because they are over staffed.

What to do about it? Everybody in the private sector knows the answer is to cut out the fat to achieve leaner and meaner organisations. Big companies do this regularly but the practice is virtually unknown in the public sector so, like Eskom, they grow and grow and become less efficient.

As a labour lawyer I’ve often been called in to assist with retrenchments. It is not a pleasant job but it has to be done because it can mean the difference between success and failure.

What I find particularly interesting is that trade union negotiators understand these economic arguments when applied to the private sector, but all understanding evaporates when dealing with public sector jobs. It is like another universe where the laws of physics do not apply.

The proof of this can be seen in the latest Eskom crisis. The trade unions, all of them, know they are dealing with a hopelessly inefficient, over staffed, bankrupt organisation. They know that Eskom workers earn a great deal more than their counterparts in the business world. They know they represent the fat and fortunate and not the struggling poor, but they still want more.

Union leaders even know that higher wages will mean higher electricity tariffs and that will kill thousands of jobs.

Don’t take my word for it. Five years ago Numsa’s general secretary, Irvin Jim, argued that the 16% tariff increase Eskom wanted at the time would wipe out 37% of the small and medium sized firms in the metal and engineering sector. He said seven foundries had already closed and “and this electricity increase will basically destroy the small manufacturing capacity we have.”

More recently Sactwu pointed out that ten years ago electricity accounted for 8% of the costs in the clothing and textile industry and that Eskom’s demand for a 19.9% increase would take electricity up to 16% of manufacturing costs. That was a real threat to jobs.

The union leaders have seen how the big energy users have been hit by rising electricity tariffs. They have seen mines being put on care and maintenance with the loss of thousands of jobs. They know that higher electricity tariffs will kill jobs in other industries, but they insist on above inflation wage increases in the very industry that will destroy the jobs of their comrades. It is like civil war with brother fighting brother.

Their only argument is that workers should not suffer because of corruption and poor management, but they have been witnesses to this corruption and poor management for years and it is a bit late to make the point now.

It would be nice to see some constructive long-term thinking from unions, but I won’t hold my breath.

The essential question that I would like to leave you with is this: how much has the inefficiency and over staffing cost the country? There will be two answers. One answer will be the sum of all the wages paid to the workers and executives who were surplus to requirements and the other will be the cost of the inefficiency itself. That can be measured in terms of poor service delivery and the red tape that has held back the entrepreneurs and investors.

Now imagine living in a country with a small but efficient public service where decisions are made quickly and where business is encouraged to go forth and create economic growth. Ah well, we can all dream.