Analysis

Rothchild’s Kingston Wants To Save SOEs! Why We Should Fear Him!

By Pinky Khoabane

MARTIN KINGSTON, CEO of Rothschild SA’s unit will step down on 1 April and according to Bloomberg, has set his eyes on reviving state owned entities (SOEs).

“Kingston, 61, will shift to executive chairman of the investment bank’s unit, and plans to wind down his executive responsibilities over the next two years before getting more involved with advising and mobilizing resources and skills for South Africa’s public sector. He already sits on the board of struggling South African Airways and is vice president of Business Unity South Africa, a lobby group,” Bloomberg reports.

A Letter from Rothschild to Eskom CEO Phakamani Hadebe shortly after the appointment of the new Eskom Board in January last year makes it very clear that the campaign to sell-off parts of the power utility should be in the mix of solutions to address its liquidity problems. In the letter, Kingston proposes that his organisation be appointed as the “independent financial advisor” to the Board. At the time many questions were raised: Is this procedural, can one propose a solution to a state owned entity with the intent of being the approved supplier when there are procedures to be followed in appointing suppliers, and what will be the guidelines of the terms of reference be? Will those terms of reference be influenced by this proposal or not?

Furthermore, is this not an attempt to influence policy direction of a state-owned company
and could this not be defined as a classical example of state capture or an attempt to capture an organ of the state?

At the time, Hadebe confirmed he had received the letter but said the power utility had no dealings with Rothschild and the proposal should be viewed as business as usual. The power utility said it received many such proposals all the time.

With the public scrutiny that the letter aroused, Kingston has seemingly gone for a different route. Resign and return to SOEs as an “independent” advisor.

“I don’t think we mobilize adequate resources to support some of the public companies that are facing very challenging circumstances,” Kingston said in an interview with Bloomberg on Monday. “If there is a role for me to play I would frankly welcome it.”

Even before the letter dated 20 February 2018, Kingston had written an email on 23 January proposing that the new Eskom board should prioritise the “independent assessment of the financial position of Eskom”. He went on to mention that “At the Eskom results presentation, I had the opportunity to discuss Eskom’s sustainability with Caleb and Andre, both of whom acknowledge the value an independent an independent advisory could bring”.

Andre is Andre Pillay, Eskom’s Treasurer and Calib Cassim who’s the acting chief financial officer.

But the question is how “independent” is Kingston? We already know he’s in favour of privatisation and this was also confirmed by Bloomberg.

“We’ve got to take a clinical and hard look at the majority of state-owned enterprises,” he said. “If they don’t play a critical role we must move them to the private sector or have them taken out of the equation as a tax on the public purse.”

Kingston told the publication that President Cyril Ramaphosa would likely take the decision after the elections on 8 May in which, as Kingston puts it, he’s likely to win a strong mandate.

A strong Ramaphosa Mandate At May elections Means Silencing The Anti-Privatisation Movement

“Those who are ill disposed to restructuring, their voices will have to be heard, but silenced,” Kingston told Bloomberg. “We don’t have time for a multi-stakeholder negotiation.”

Why we should take Kingston seriously. 

Kingston himself could never be seen as an independent player in the South African economic environment. He was Chairman of Deutsche Bank when through the Rand Commission of inquiry into the Rand’s 37% decline, it was established that he was an architect in the decline of the Rand and the bank was fined R800m for its assault on the Rand.

A 2006 article in News 24 wrote: “Deutsche finally confirmed Kingston’s departure in June under a cloud of allegations concerning his wife’s involvement in the Old Mutual empowerment transaction that Deutsche advised and an alleged irregular contract between Deutsche and former National Empowerment Fund (NEF) CEO Sydney Maree”.

Trevor Manuel is currently Chairman of Old Mutual, serves the Rothschilds and was in the circle of Transitional Executive Committee (TEC) which through an $850million IMF loan to pay for apartheid debt made concessions including privatisation and cuts in state spending for the Reconstruction and Development Programme (RDP).

Privatisation of State Owned Entities In South Africa

“When the World Bank and the International Monetary Fund lend money to debtor countries, the money comes with strings attached. These strings come in the form of policy prescriptions called ‘structural adjustment policies.’ These policies require debtor governments to open their economies to penetration by foreign corporations, allowing access to the country’s workers and environment at bargain basement prices. Structural adjustment policies mean across-the-board privatisation of public utilities and publicly owned industries. They mean the slashing of government budgets, leading to cutbacks in spending on health care and education. And, as their imposition in country after country in Latin America, Africa, and Asia has shown, they lead to deeper inequality and environmental destruction.” Global Exchange.

One of the institutions that arose out of the negotiated settlement was the Transitional Executive Committee (TEC) as an interim government comprised of members of the ANC and the Nationalist Party. The TEC had many sub councils one of which was the sub-council on finance. The terms of the $850 million IMF loan the ANC government took in 1993 included cuts in state spending, the privatisation of SOEs, large cuts in public sector wages, and commitment to abandoning nationalisation. The ANC took out this loan to service the apartheid debt which was used to buy arms in its battle against Black people and to prop-up a system that oppressed them. In 1951-67 for example, the World Bank lent the apartheid regime more than $200m, half of which went to support electricity generation when the sprawling townships were denied electricity. In effect, the ANC paid for apartheid loans which were meant to destroy the Black populace. The IMF and World continued to supply loans to apartheid South Africa despite calls for anti-apartheid financial sanctions.

Since the $850m loan there have been more millions poured into the country as loans from the World Bank and with it, the ditching of the more progressive aspects of the Reconstruction and Development Programme (RDP). The Bank has had many representatives advising post-apartheid SA on policy which has been more “market orientated” and anti-poor.

Who were among the members of the TEC sub-council on finance that agreed to this deal.

  • Former President Thabo Mbeki headed the council
  • Former Finance Minister Trevor Manuel who was Chairman of World Bank and IMF at one stage and is now head of Rothschild Africa
  • Maria Ramos who was Director General of Treasury. She left for Transnet before ending at Barclays Africa as CEO
  • Pravin Gordhan who was co-chair of TEC from 1991 – 1994, Sars Commissioner from 1999 – 2009, was appointed as finance minister in Zuma administration and returned for a second term after Nenegate. He was fired as part of Zuma’s last cabinet reshuffle and returned in President Cyril Ramaphosa’s cabinet. It was Pravin who signed for the $850m IMF loan
  • Tito Mboweni who became Minister of Labour and thereafter Governor of Reserve bank between 1999 – 2009, and was advisor of Goldman Sachs International before being appointed to Ramaphosa’s cabinet.

 

 

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