CEO exodus: Transnet, Eskom, PnP, Naspers and more …

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JIMMY MOYAHA: On Friday after market close we got a confirmation that the Transnet CEO was stepping down, along with the Transnet CFO. This morning Pick n Pay announced that their CEO was stepping aside. It looks like there have been quite a few of these announcements.

I’m joined on the line by independent analyst Khaya Sithole to take a look at this. Khaya, good evening. Thanks so much for your time. Where do we start the CEO Exodus of 2023? Is that what we’re titling it?

KHAYA SITHOLE: Well, it does feel like indeed there is yes, a big exodus that we are seeing from some of these critical roles. And I think obviously for a lot of the businesses that have tried to tick up from the post-Covid pandemic situation and then tried to fashion their strategy going forward, they may have discovered that the CEOs that they had in charge were probably not the right ones for that particular new strategic direction.

I think you can take it as far back as the beginning of the year when the Eskom CEO left, in that there’s clearly been a move to be clearer about whether an individual is fit for purpose, and if they’re not fit for purpose to look for alternatives.

JIMMY MOYAHA: Let’s start with the Transnet one, because we’ve touched on the other ones in the past. But let’s look at the Transnet one given that the CEO and CFO have now left the business and there have been comments around the business being rudderless, there have been comments around the fact that we need decisive action from the minister of public enterprises.

What needs to be done at Eskom now from here to get it back on track?

KHAYA SITHOLE: I think in relation to Transnet it is unfortunately one of those situations where you could see the writing was on the wall. I think even before we had big influential groups like the Minerals Council actually spelling it out, it was very clear that the executive leadership team was struggling to turn the ship around.

And I think in those particular struggles, unfortunately the casualties were not just Transnet and Transnet’s own operations, but the economy at large was always going to feel the effect of Transnet’s hangover.

And I think what made the call much bolder from all of these particular stakeholders was a realisation that the team, as it was currently constituted, quite simply did not give the impression that it had the right instruments or the right expertise to implement a turnaround. I think the fact that they’ve now resigned is reflective of the internal tensions and the internal pressures that they felt, also bolstered by the public outcry over just how poorly their strategic reorientation or the turnaround was proceeding.

Read/listen: Cosatu calls for competent leadership to revive Transnet

Obviously one of the biggest problems that we always face with Transnet is the question of whether those who are responsible for looking for the next leader, whoever that might be, have actually taken lessons from what has gone wrong with this particular transition, with this particular leadership team.

If they don’t take lessons, then you are actually just going to end up with another iteration of the same issues.

JIMMY MOYAHA: I like that you brought that up, Khaya, because that’s where I was going next on this. We’ve seen an exodus across industry. Just today, as we mentioned earlier, the Pick n Pay CEO; if we think back to the last couple of weeks, David Hurwitz from Transaction Capital; Bob van Dijk of Naspers.

We’ve seen notable changes being made where the shareholders have felt that we might need to make a different strategic decision for the business to continue going forward.

The question now is, is there the political will from the shareholder in the case of Transnet, in the case of Eskom, to make the decisions that need to be made?

KHAYA SITHOLE: The biggest problem with Eskom and Transnet is the simple question of what exactly the shareholder ought to do in relation to these leadership changes. I think what we now know in relation to the Eskom scenario is that it has come down to a question of semantics, of saying: ‘Well, you guys sent me only one name of the person whom you thought appropriate, while the law allows me to demand three names from you.’

That of course derails the process, and it is not particularly clear whether the minister formed the view that that singular individual would not be capable of actually running the affairs of Eskom because, if that person has been interviewed and vetted and had been seen as the most appropriate candidate, even in the list of three, the board would still indicate that this is the person they would prefer to hire.

So it does look like in spite of the fact that we all agree that this is an emergency situation, the political principals still feel that they’ve got latitude to actually implement the political mandate …

… rather than responding to the nature of the emergency that we have, which is obviously surprising to a lot of people who thought at least the president had warmed up to the reality that ‘this is a crisis that cannot wait for a day’.

 I think the fact now that the process has been stalled doesn’t reflect well on the shareholder. It doesn’t reflect well on the government.

And the fear is that it would be the same issue that we’re going to experience at Transnet, particularly given the fact that we’re still dealing with the same minister and we’re dealing with the same challenges – the biggest challenge being the simple question of who in their right minds would actually want to do the job.

JIMMY MOYAHA: Khaya, is it a time for us to appoint a new minister of public enterprises, given the state of all state-owned entities. We’ve spoken about it on numerous occasions before but taking into account the most recent figures – figures around the R5.7 billion loss at Transnet, figures around the significant loss at the Post Office that now has exceeded the assets that the Post Office has on hand – is it time for us, from a public sector point of view, to look at a different way of approaching this? As we’ve said with examples like Transaction Capital, like Naspers, like Pick n Pay, like Spar, which are all big corporations, the private sector’s not afraid to make the decisions that need to be made.

Read: Spar Group CEO Brett Botten to exit

Is it time for the public sector to follow suit?

KHAYA SITHOLE: Unfortunately, I have learned the hard way that the mere process of changing political figureheads without changing the underlying political architecture that enables the current incumbent to sort of do the things that he’s done, or to create this paralysis – that is the problem.

Read: Eskom board at odds with Gordhan over CEO search

So for me, if you said that we’re changing the minister tomorrow, that that minister is going to use the same instruments of derailing these processes, even though they look different, we haven’t solved the problem.

The question that we should be deliberating on is whether such institutions should indeed be subjected to a process of these multiple levels of concurrence that are required in order to confirm the appointment of a CEO.

So, if you have a fully constituted board and they’ve gone on a worldwide search underpinned by reputable recruitment agencies, and they take the view that this is the individual who should be taking on the job, it’s always been difficult to understand what exactly it is that a minister – or a cabinet structure or a deployment committee that does not actually interview any of the candidates – what exactly then becomes the basis for them saying that no, candidate one is not good and candidate three is the one that should be appointed.

Read: SOE CEO appointments remain a governance minefield – IoDSA

It really makes very little logical sense, except of course it gives those in political power the latitude to say,’ well, it was still ultimately my decision on whom to appoint’ – but that on its own doesn’t seem to be the type of thing that should be a priority at a time of crisis.

JIMMY MOYAHA: So as we wrap up this CEO exodus of 2023, clearly some people have not only been able to avoid the chopping block, so to speak, but have actually been rewarded in some respects.

I mean, if we look at the transition [of Nonkuleleko Dlamini] from CFO of Transnet to CFO of Telkom, with the Telkom Sens announcement almost coming out before the Transnet Sens announcement, do we get a sense that there is still a lot of political deployment in these positions, and it’s not necessarily on merit per se?

KHAYA SITHOLE: Well, there’s a complication in that actually the appointment in relation to the CFO of – well, now Telkom seems to have predated last Friday’s issues in the sense that she was already under a notice period at Transnet; the fact that it wasn’t announced when it started is a story on its own. But if we are to go on the word of Transnet, this resignation actually was at the beginning of September rather than the end of September.

And of course Telkom itself, even though it has some element of state ownership, isn’t subjected to the type of chaos that we are talking about in relation to Eskom and Transnet.

So it would’ve been the board of Telkom that would’ve unilaterally and independently decided that this was the individual they wanted in order to be able to run their business.

I think obviously the reputation and perhaps the pedigree of the new CFO would’ve been based on the work she had done probably before Transnet.

I don’t think Transnet looms large as a highlight in her career, given just how difficult the situation has been there. So I think there is a difference there in that the Telkom board isn’t subjected to the same shareholder interference and limitations that we’re seeing at Transnet and Eskom. So I do think that she has got out there on merit and somehow she managed to see the ship was about to sink, if you want to call it that, and decided to exit the Transnet structure much earlier than last Friday.

JIMMY MOYAHA: Always plan your exit much better than you anticipate. Hopefully we’ll reflect on this exodus of 2023 more fondly than what it looks like at the moment.

But thanks so much, Khaya. That was independent analyst Khaya Sithole giving us his thoughts around the recent surge of leadership changes that we’ve seen across the public and private sector.