Instructive lessons for Eskom from British Leyland’s experience

Instructive lessons for Eskom from British Leyland’s experience

There is a long, ever-lengthening, list of SA-originating business leaders who have achieved huge success and had high impact in boardrooms and markets across the world.

Elon Musk and Roelof Botha in the hi-tech field in California (and even outer space in the case of the former); Ivan Glasenberg and Mick Davis in the world of resources; Jan du Plessis chairing some of the top FTSE top 100 companies; Natie Kirsh exporting his brand of entrepreneurism into some of the most competitive  business jurisdictions, such as China … the roll call of the business good and greats we have exported into the wider world is much deeper than just these high-flyers.

But one such high-profile SA player had a vast influence on the political economy of another country, at the time mired in industrial disputes, disastrously mismanaged state-owned companies and a seriously underperforming economy that mirrors SA today.

Yet the death on September 15 of Sir Michael Edwardes in Britain, at the age of 88, went almost unnoticed in this country; though his obituaries across a swathe of British newspapers testify to someone well-described as “a key player in the Thatcherite revolution”. His singular leadership helped Britain shake off its moniker as the “sick man of Europe” in 1979 and achieve its pre-eminence (before Brexit) as one of the most competitive and employment-rich economies in the world.

There are some significant parallels between the appointment and the leadership of Edwardes as chair of British Leyland from 1977 until 1982 — described at the time as “an industrial relations disaster” and “the toughest job in Britain” — and the never-ending search for a new leader of our own big state disaster, Eskom.

Apparently, the search for the new CEO has been reduced from a long list of 300 to about three names. But as Peter Attard Montalto of Intellidex wrote in a recent note: “There is some uncertainty still that there is an intersection between people who would do the job, people who would be good at the job and people who are politically acceptable.”

It must be doubtful whether this unholy trinity is remotely achievable and the leisurely pace with which the appointment is proceeding, given the dire and urgent situation faced by this behemoth, suggests something lacking both urgency and resolve. After all, the beleaguered CEO of Eskom, Phakamani Hadebe, announced his resignation in May, and three months before that, in February, President Cyril Ramaphosa heralded the break-up of Eskom, on which no further progress has been announced. No paper on its future form, or even the desperately needed energy mix, has been approved or published.

“Lackadaisical” was the recent slap down Ramaphosa conferred on his fellow citizens who happen to be white. But a defined “lack of vitality and purpose” is a fair description of his somnambulant government as it averts its gaze from a series of cascading crises facing the nation.

Writing in the Sunday Times this weekend, Hilary Joffe located this malady across the board in most of the ailing state-owned enterprises (SOEs), which Ramaphosa, defying the laws of economic logic and at risk to sovereign solvency, vows to keep afloat. She noted: “Currently almost every one of SA’s SOEs has an acting CEO … one question is clearly whether the government and the [SOE] boards are genuinely willing to hire the best [CEOs] as they claim.”

If past form is anything to go by, racial demography and fealty to ANC economic policy will be key considerations for any aspirant CEO of Eskom and other SOEs. That’s why the case of Edwardes is such a fascinating study in contrast, a case perhaps worthy of current application in his homeland, SA.

Edwardes, who had a tough father and upbringing, an excellent education at St Andrews and Rhodes University, would over time become a poster boy for the Thatcher brand of staring down the mighty trade unions and making British industry more globally competitive. Ironically, his battles with recalcitrant unions were matched by some fiery clashes with the formidable Thatcher, who resented his need for more state-funded bailouts to keep British Leyland afloat. But she reluctantly met his funding requests as she realised that he, and British Leyland, were the allies she needed to tame the runaway power of the unions, whose work stoppages, overmanning and industrial anarchy had brought the biggest carmaker to its knees.

Yet it was a Labour party government in 1977, of whose key policies Edwardes was a voluble critic, that — distressed at the loss of production of about 250,000 cars through industrial disputes — sent for Edwardes. He had achieved a reputation elsewhere in the industry as a scrappy and abrasive fighter for management discipline and excellence.

But it was his staring down of union power, forcing below-inflation wage hikes and compelling needed redundancies that saved the company (or most of it) in the early years of the next administration, headed by Thatcher.

In her autobiography, The Downing Street Years, which devotes many pages to the British Leyland saga and Edwardes’ leadership, Thatcher left unmentioned that he was a South African who spoke, apparently, with “a clipped SA accent”. Merit, not national origin, counted for The Iron Lady.

Part of the success plan of Edwardes was to bypass the revolutionary leadership of the unions and to speak directly to the workers themselves. He forced ballots on the factories and achieved success with an 87% approval vote for a plan to cut 25,000 jobs to save the company.

Thatcher resented his demands for more tax money — eventually costing the fiscus about £990m — but she realised her backing was essential as “Michael Edwardes and the British Leyland board held their nerve and faced down the union threat”.

Of course, the contrast with the hapless position of outgoing Hadebe could hardly be starker. He, like Edwardes, could read a balance sheet and his vastly inflated (by about 30,000 workers) staff payroll. Last June he correctly prescribed a drastic, Edwardes-style, remedy. He offered a zero percentage increase.

Instead of backing him, however, Ramaphosa and public enterprises minister Pravin Gordhan cut the ground from under his feet. They mandated an unaffordable 7% increase. Ramaphosa then doubled down by promising no retrenchments in the state sector. Little wonder that, nine months later, Hadebe quit, citing “unimaginable demands which have unfortunately had a negative impact on my health”.

Edwardes, a diminutive figure at 1.6m, had an outsize impact because, in his own words, liking a good game of squash appealed to his fighting instincts:

“I relish a good challenge and a bit of a fight, if that is what it takes. Yes, you could say I am a bit of a scrapper.”

As The Times of London noted in its obituary of him, those words summed up his many, mostly winning battles at British Leyland. Perhaps the Eskom search committee, and the boards of SAA, Denel, Transnet and the other sickly SOEs, should make that description the first requirement of the refreshed leadership they seek. And, of course, a government that will back up the new CEOs in their tough battles and not undercut them at every turn.

Hope springs eternal, as the saying goes.

Leon, a former leader of the opposition, now chairs Resolve Communications.
@TonyLeonSA.

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By |2019-10-01T06:11:22+00:00October 1st, 2019|Eskom, Opinion, South African Politics|0 Comments

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