Many of South Africa’s state-owned enterprises – Eskom, Telkom, SABC – remain mired in controversy as they battle to get to grips with the demands of a modern economy. Much could be learned from successes elsewhere in the world, such as in Poland.
“Poland is the only European economy to have posted consistent growth during the long European recession,” says Sandra Burmeister, CEO of Amrop Landelahni. “Could the transformation of its SOEs in the post-communist era lie at the heart of its achievements?
“Poland’s success story indicates that ‘state capitalism’ can be something other than a contradiction in terms.”
In the wake of the 2008 economic crisis, Poland “needed to answer the tricky question of how a state-owned company could achieve the agility of a privately-owned organism,” says Tomasz Magda, managing partner of Amrop Poland.
“This is not just a local tale from the heart of Europe. For in the Polish story lie vital clues to a global story – one that finds its most powerful expression in today’s big emerging markets. It concerns the transformation of a group of state-owned behemoths in the hands of a generation of superlative leaders – people motivated not by money, but by the chance to make deep change.
“In some key strategic sectors, the state divested itself of shareholding to below 50%; in others, it retained 100% ownership, but resolved to manage these organisations as if they were publicly listed or privately owned.”
Compensation, however, remained a problem with legal regulations limiting executive pay. “Motivating a CEO in such conditions meant reaching out to a distinctive group of intrinsically motivated individuals who were able and willing to board ship for the sheer love of the job and the appeal of re-orienting the course of their heavy vessel,” says Magda.
“South Africa could well take note,” comments Burmeister. “In South Africa, we are in danger of missing the boat altogether, let alone transforming our state-owned supertankers into speedboats.
“Poland’s experience shows how the challenges of government interference, nepotism and political cronyism can be transcended. How much easier this should be to achieve in South Africa where the heads of SOEs are paid a market rate.”
“In Poland, the ministries themselves consciously and proactively stepped back from the bridge,” says Magda, “Limiting state interference in the governance, strategy and operations of a nationally crucial organisation may be counter-intuitive, but it can yield exciting results.”
“Not surprisingly,” says Burmeister, “In organisations where state control was limited, the leadership could more easily and rapidly make the changes in structure and management culture needed for revitalisation”.
“In South Africa, as elsewhere, governance is a crucial issue. The roles and responsibilities of the shareholder and of the board must be clearly defined. It is the shareholder’s role to appoint qualified and capable board members who are equipped to ensure the organisation is managed according to sound governance principles.
“Too much state interference results in a conflict of interest and is counter-productive. At a policy level, we need to define the role we want our SOEs to play in the economy, and agree a clear set of transparent deliverables that hold both the board and executive team accountable. That will allow the board, once appointed, to act independently, and be free to nominate its chairperson and appoint the CEO and other executive directors, while still remaining accountable to the shareholder and public at large.
“The transformation of state-owned supertankers into the corporate speedboats of the future reveals a stark reality,” says Magda. “Getting the right leadership on board is an unusually difficult challenge and a pivotal success factor.
“Poland’s experience shows that it takes exceptional talent to lead the transformation of an organisation with a weighty inheritance into its desired new state of agility, proactivity, collaboration and innovation.
“State capitalism is not just a Polish issue. The notion of organisational revitalisation – no matter the ownership structure – is a widespread concern. Those who rise above the odds to succeed in their mission have proven their ability to manage change in a wide spectrum of environments.”
“South Africa has the talent to take up the challenge,” says Burmeister. It’s up to all stakeholders to go beyond the usual suspects when looking for fearless, agile leaders who can reinvigorate our SOEs to become productive suppliers of strategic services.”
· Amrop: State Capitalism – A Transformational Tale From the Heart of Europe, Tomasz Magda, Amrop Poland, November 2013, www.amrop.com/state-capitalism-transformational-tale-heart-europe