Wanted: gutsy leader to sip from poisoned chalice
November 17, 2009
Anyone brave enough to apply for either of the top positions at Eskom perhaps deserves to get the job, if for no other reason than sheer gutsiness.
Apart from Jacob Maroga, there can't be too many executives eager to become the target of South Africans' wrath as price hikes pinch pockets, never mind the very public risk of being labelled racist, incompetent, or perhaps both.
We now know that Bobby Godsell isn't prepared to sit in the chair again. When asked to return to his job after the board stood firm in its resolve to let Maroga go, Godsell said yesterday: "Eskom is ready to move forward under new leadership."
Eskom has no choice but to be ready. The question is whether the new leadership will be ready to run with the myriad issues Eskom must confront - starting with the pending revision of its proposal to hike tariffs by 45 percent a year over the next three years, due to be submitted to the energy regulator by the end of the month.
Engineering News reports that Eskom is seeking to lop at least a nominal 10 percentage points off its initial figures. Options could include deferring or scrapping projects like the Kusile coal-fired station, increasing direct government funding, bringing in private equity (possibly in the form of a partial private offering), upscaling demand-side management and increasing the role of independent power producers.
It remains to be seen whether a leaderless state-owned enterprise would be brave (or foolish) enough to moot partial privatisation at the tail end of a debate that raged on nationalising mines.
Without an injection of private equity, South Africans will carry the burden of keeping the lights burning. If the state commits more taxpayer funds, they will be diverted from other programmes. If more power is produced independently, consumers will still have to pay for it. If generating projects are scrapped and no alternatives put in place, we run the risk of blackouts or load-shedding in the future.
There are many options, but few easy answers.
Madoff madness
The Bernard Madoff story is surely one of system failure. Every single system that should have been relied upon to rein in this fraudster failed.
The accounting profession failed, the auditing profession failed, the Securities and Exchange Commission (SEC) failed, the whistle-blowing system failed, and the ability of informal networks to exert moral influence failed.
Absolutely everything that might have helped to curb Madoff's ability to con people out of huge amounts of money, failed.
And it seems there was nobody that Madoff didn't regard as a potential "mark"; he even conned charities.
During his trial, Madoff, a former chairman of Nasdaq, told an SEC investigator that he should have been apprehended in 2003 but was spared by the incompetence of the SEC investigators who were looking into concerns raised by a whistle-blower.
And so it is entirely appropriate that the auction of some of Madoff and his wife's belongings raised 20 times their estimated value. A New York Mets baseball jacket that had been valued at about $720 (R5 375) went for $14 500; two pairs of his wife's diamond earrings sold for $70 000 each after a presale estimate of $9 800 and $21 400 a pair.
This does remind us there may be some underlying weakness in the ability of the pricing system of the most powerful and the wealthiest market economy in the world, which prevents it from functioning effectively. The same sort of pricing weaknesses have been apparent in the market for toxic assets since the collapse of Lehman Brothers 18 months ago.
When it comes to perceived value there is no accounting for individual appetites.
Terminal illness
South Africa has just 1 percent of the global cruise liner market, but the local market has grown and ocean cruises could corner a greater slice of the tourism pie with the right port facilities.
The cruise industry has, in the past three decades, grown from carrying about 1.4 million passengers in 1980 to more than 15.4 million this year. In 2004 MSC Cruises was carrying 250 000 passengers a year worldwide. This year it expects to carry more than 1 million passengers.
In 1978 the cruise season in South Africa totalled 1 000 people, which is half the number of people now accommodated on one cruise on the MSC Sinfonia that is currently operating out of Durban port. It is expected that during this season, which runs from November to April, passenger volumes on the Sinfonia will be about 75 000.
In South Africa 25 percent annual passenger growth is expected, which is line with global trends.
According to Pierfrancesco Vago, the chief executive at MSC Cruises, the business has proved recession-proof as it offered value for money. In South Africa, the aggressive marketing strategy has successfully targeted those wishing for a holiday that was somewhat "exotic" but affordable, with a mix of short and long cruises to suit "many different pockets". Its end-of-year cruises are close to being booked out.
But growth in the South African business is hamstrung by uninspiring port facilities that can leave those waiting to embark baking in the hot sun. The current facility, a converted warehouse, is neither big nor comfortable enough to handle the 2 000 passengers embarking. MSC Cruises is pushing Transnet to invest in a terminal similar in look and feel to an airport.
Transnet says it is in talks with MSC Cruises in this regard, but given that it is a freight firm with its hands full planning costly projects to boost the efficient handling of iron ore, coal and containers, it is not surprising that the cruise line industry is not top of its agenda.
Perhaps Transnet should offer a private sector firm a concession to build and operate a cruise terminal at the Durban port so it can be relieved of this headache.
Edited by Peter DeIonno. With contributions by Ingi Salgado, Ann Crotty and Samantha Enslin-Payne
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