Red Alert:

Futuregrowth has not been investing in SOEs out of a patriotic commitment to development in SA anyway... Its sanctions are clearly ill-advised, but strategic differences should not become the gap through which SOE looters mislead gullible audience into believing that their own behaviour in and around the public assets is somehow a progressive blow against monopoly capital.

By the Secretariat of the SACP 13th Congress Central Committee 

Last week Futuregrowth, an asset management entity and a subsidiary of Old Mutual, announced it would be suspending loans to a number of public entities. Those mentioned were Eskom, Transnet, SANRAL, the Land Bank, the Industrial Development Corporation, and the DBSA.

Futuregrowth said the decision would stand until “there was further clarity and comfort” around the governance and oversight of these state-owned entities. It linked the decision to Cabinet’s announcement that SOEs would come under the overall supervision of President Zuma, as well as to the recent exposure of wide-scale parasitic plundering of SOEs.

In the mainstream media, Futuregrowth’s announcement was predicted to be the beginning of a wider move by other investors. However, within two days, Futuregrowth’s parent company, Old Mutual, speaking through its Emerging Markets CEO Ralph Mupita, said that Futuregrowth’s comments did not represent the broader views of Old Mutual.

So what’s going on here?

Futuregrowth has not been investing in SOEs out of a patriotic commitment to development in South Africa, at least not in any sense of all-round social development that would be recognisable to progressives. Futuregrowth has loaned capital to SOEs because infrastructure investment backed with government guarantees is, generally speaking, one of the safer bets for a long-term fixed investment portfolio.

At the same time, there is a potential neat fit with its parent company. Public sector investment in infrastructure (for example SANRAL expanding Gauteng’s freeway network) can increase the value of Old Mutual’s existing stock of commercial property and open up new areas for profitable investment.

Additionally, it is not just Old Mutual’s property interests, but monopoly capital in general that stands to benefit from “lowering the cost to doing business FOR BUSINESS” through major infrastructure programs in things like logistics, energy and water.

In the present, and historically as Marx long ago recognised, where the scale of these infrastructure projects is substantial and the direct construction related profits relatively low, capital is happy to shift the cost and risk burden of infrastructure onto the public. Privatisation is not always a preferred option for capital.

The public sector (through SOE’s) carries much of the burden, while capital benefits from the infrastructure both as a user and often in Build-Operate-Transfer arrangements, for instance, as a fee drawing operator. And then, through interest paid back to private banks and investment vehicles (like Futuregrowth) business scores yet again.

For an aspirational democratic development state, like our own, operating on the terrain of a capitalist-dominated society, public-sector led infrastructure development is essential for inclusive growth, for energy, water and food security, and for jobs. And so the challenge is how, with budgetary constraints, does a progressive state leverage extra private sector funding to drive infrastructure programmes that produce inclusive growth and sustainable economic and social development for the majority?

This requires, amongst other things, SOEs with a strong developmental mandate aligned to an overall national democratic transformational agenda, operating within a strategic (and not just fiscal) discipline. For the likes of Futuregrowth budgetary discipline (“good governance”) of SOEs is important (to guarantee repayment of their loans). But a developmental strategic discipline is likely to be of less concern, or even a matter of dispute as to what it would constitute. Is Futuregrowth likely to prefer upgrading Metrorail stations in townships, or more costly Gautrain-type projects that boost property values around Sandton by some seven hundredfold?

But now there is a new and manifest threat to both the more narrow “good governance” requirement, and the wider imperative of a developmental strategic discipline – the parasitic plundering of key SOEs. In truth, this form of parasitism is not a new reality in the post-1994 South Africa.

It was certainly well under-way during the Mbeki presidency, but it has now reached unprecedented levels with the most recent slew of disclosures on how public resources in our SOEs are being milked by parasites - in Eskom (the Gupta-owned Tegeta affair, for instance), in Denel (the Gupta-linked VR Laser Asia deal), in SAA, in PRASA, amongst others.

These revelations and the recent Cabinet statement that the strategic oversight of SOEs would be under the overall supervision of President Zuma are the direct context in which Futuregrowth announced its intention to suspend future loans to SOEs.

Clearly, Futuregrowth is right to express concern about what is going on in some of these key SOEs (although its list included offenders and apparent non-offenders alike).

Presumably Futuregrowth believed that in making its ill-advised announcement, it would be strengthening the hand of the Minister of Finance, Comrade Pravin Gordhan and Treasury in their attempt to ensure greater probity in the governance of these entities. 

But that is a miscalculation, judging by the dismissive arrogance with which Eskom CEO Brian Molefe conducted himself in Parliament last week. We are dealing with corporate capturers (and the corporately captured) who will simply waft away Futuregrowth’s threat, and claim it’s just part of a wider “white monopoly capital” conspiracy. 

The SACP has consistently argued throughout the corporate capture saga that the situation calls for clear thinking. We need to understand that, while the strategic objectives of a Futuregrowth or an Old Mutual might overlap to SOME extent with our’s, they do not coincide.

But these strategic differences, and they are substantial, should not become the gap through which parastatal looters mislead a gullible audience into believing that their own behaviour in and around our SOEs is somehow a progressive blow against monopoly capital.

This article first appeared in Umsebenzi Online, the online journal of the SACP.