Bruce Whitfield: What we need to learn from Telkom fast, to save South Africa

Business Insider SA


  • Telkom is SA’s best example of how to turn around a corporate dinosaur.
  • Liberalisation of telecommunications has spawned businesses we never dreamed of 20 years ago. 
  • Which is why more SOEs must follow its example. 

It’s cheaper today to phone anyone anywhere than it was 25 years ago when a single state operator ran the country’s telephone system.

Today, telecommunications are more accessible than ever. 

The reason? 

Government took the decision in the early 1990s to deregulate the industry and allow competition. It led to a massive and painful upheaval for the incumbent, but that decision created an industry which today provides better access. It is cheaper and more efficient than it would ever have been, had competition not entered the market. 

And Telkom itself, while by no means perfect from a customer service point of view, is a leaner, more competitive beast as a result. 

Over the past 20 years, Telkom has slashed 75% of its jobs - from 61,000 down to 15,000. Admittedly, it has outsourced some staffing, but at least this allows for greater flexibility when it comes to operations. 

Critics of state-owned enterprise deregulation is that it could lead to job losses. Take Eskom, where the president was forced to guarantee, before the elections, that no jobs would be shed as part of the entity's long overdue restructuring.

But the jobs issue misses the point entirely. 

It is neither the job of Eskom nor government to create jobs. Government needs to get out of the way of job creation and run the enterprises it absolutely needs to own. Not to preserve jobs, but to facilitate the creation of businesses that will create jobs far more effectively than the state ever can. 

Between them, Vodacom, MTN and Cell C employ about 26,000 people. Add to that the proliferation of broadband suppliers, ISP’s and the host of tech enabled businesses that would not exist were it not for the competition that made access to telecommunications more affordable. 

The desire by inefficient state enterprises to preserve jobs by making losses is in fact robbing thousands more of opportunities that we have not yet even considered. 

On Monday, Telkom reported an 11.5% increase in operating profit to R3.3 billion, thanks largely to its booming mobile business which saw an 85% increase in subscribers and its ability to keenly price its product. 

Government owns about 40% of Telkom, the PIC a little over 10%. It’s listed on the JSE and has its own board and autonomous management teams. 

Strictly, it’s not an SOE. But that’s the point.

The state relinquished outright control. The board appointed Sipho Maseko as CEO and by and large has left him to get on with running the place. 

Government's stake in the business is now worth R18 billion and it regularly receives a dividend. That while SAA cannot find an equity partner in its current state and continues to drain the fiscus, rather than add to its cashflows.

Government needs to act swiftly to carve up Eskom and deregulate energy generation and distribution. Eskom, with its mounting debts, will need to more than halve its headcount over the next decade and fight for relevance as new, smarter players enter the market. 

Cheaper, reliable energy gives the country the chance to grow the economy and create jobs to replace those that are lost. 

It’s going to hurt. Delaying the pain will just make it worse to rectify in the long term. 

Bruce Whitfield is a multi-platform award-winning financial journalist and broadcaster.

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