Joburg’s broken finances could doom its next mayor

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JEREMY MAGGS: Ahead of the local government election just around the corner, Johannesburg’s mayoral hopefuls are making plenty of promises, no surprises there, but what if even the best of those plans are doomed before they begin?

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Well-known and often outspoken businessman and former South African Post Office chief executive Mark Barnes is arguing that the city’s finances are so badly broken that no incoming administration can realistically succeed without what he terms a fundamental financial restructuring.

He’s calling for National Treasury to help ring-fence unmanageable debt and bring in specialist expertise.

Let’s explore that in a little more detail. Mark Barnes, welcome to you.

Is the thesis of your argument then that Johannesburg is effectively financially bankrupt and it doesn’t matter which mayor comes in and however competent, it’s going to be very difficult to fix under current circumstances?

If that’s the case, we seem to be in a lot of trouble.

MARK BARNES: Imagine you called up Usain Bolt and you said to him, we’ve got the final for the 100m coming up, but we want you to carry this load of bricks with you, do you think you’d get to break the world record like that? He won’t.

So what we’ve got to do is start from a position of the incoming CEO – forget about whether that’s the mayor or what title they might have – has to sit with the shareholder and say, excuse me, I need to know that I have a foundation from which I can make “normal” operating decisions and management guidance.

Absent that, I’m going to spend my entire term in the bog, fighting for oxygen, never mind building a city.

I’m saying the numbers, if they are to be believed, first of all, we need to find the facts. Every politician has got a different number for this and R100 billion for that.

I was listening to a thing this morning where Pemmy Majodina, the water minister, was saying we need R400 billion to fix water infrastructure, and by the way, we need the private sector to give us the money.

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Well, don’t be silly, man.

First of all, we won’t give you the money and second of all, who worked out the numbers?

I’m saying get an operating budget and a functional ecosystem that you present as a player and then say to all the constituent parts that would not typically be under your remit, show me how you’re going to fix it.

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Show me, Mr Police, how are you going to fix crime? I’m not going to do that; I’m managing a city. Show me, Mr National Treasury, how you are going to work out a long-term capital plan with me?

Because, if I have to pay you interest on the loans that I owe you every month, I can’t run a business.

Show me the water utility, how are you going to give me a functional city so I can focus on the industries that need water to exist? And that’s what I’m saying.

JEREMY MAGGS: Mark, that all depends, I guess, on exemplary leadership and whoever that mayor or chief executive is, is going to have to have a lot of juicy carrots and a couple of really big sticks in order to corral people into moving in the same direction. I’d suggest to you that within the current political environment, that’s almost impossible.

MARK BARNES: Well, it is almost impossible by design. Because what happens is the executive to run Johannesburg or any other major metro or any municipality for that matter, is elected by the popular vote.

The popular vote produces the lowest common denominator outcome of wants, not expertise.

So the challenge is for those elected by the democratic vote to then appoint experts to run the city instead of running it themselves.

Cadre deployment, I’m sorry, is pervasive in every political party I’ve been exposed to.

So you can’t say I’m the popular mayor and therefore I know how to fix corruption. No. Or therefore I can manage this budget. You can’t.

Get someone who can and have a fairly solid ground from which to think rationally in planning the steps that you’re going to take forward.

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That’s the fundamental disconnect, is we’ve got allegiances and popularity. You can’t, Jeremy, become a dentist by the popular vote. You can’t say, listen, we voted our mate John, he’s going to be the dentist.

Well, no one’s going to go to him when they’ve got a real tooth problem, and that’s what we’ve got.

We need dentists, not friends, and those friends need to appoint pools of parallel expertise, which are beyond their remit and capacity to simultaneously build the guardrails within which their focused strategy of creating an economically viable city which can support growth and therefore start addressing really inequality and poverty and those things.

Whilst we do that, will you make sure our backs are covered with water and the cost of electricity and collecting debt.

JEREMY MAGGS: Mark, your argument, as you’ve just said, calls for specialist teams to tackle failing services. But who appoints these experts? Would they want the jobs necessarily?

And perhaps most importantly, how do you keep political interference out of that process? Because we have a track record of that happening in the past.

MARK BARNES: By submitting to a higher cause than your popular outcome. The higher cause in the case of Johannesburg, is way beyond Johannesburg, it’s SA Inc we’re talking about you.

If Joburg fails, South Africa fails, Gauteng fails.

All of these things are related and embedded in one another’s misery.

You need a leader who uses power to effect change, not to perpetuate leadership.

Around the world, we’re seeing perpetual leaders, leaders who entrench themselves by hook or by crook – and I say that with some enthusiasm – to make sure that they are still in charge, because the being in charge is what they want.

I spend my time listening to political parties talking about each other more than they talk about Johannesburg.

They say, well, the ANC (African National Congress) this or well, the DA (Democratic Alliance) that or the EFF (Economic Freedom Fighters) that.

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Well, I don’t care what they think about each other, I care about what they’re going to do and who they’re going to do it with because they’re going to need private sector capital.

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More importantly, they’re going to need foreign direct investment. We don’t have the economics at a 1.2% GDP (gross domestic product) growth, inflation at over 4%, we do not have the economics to be the foundation of net economic growth.

JEREMY MAGGS: Mark, if I read your analysis in your Daily Maverick piece correctly, you’re also proposing that the historic debt burden be ring-fenced. What exactly happens to that debt then and who ultimately pays for it?

MARK BARNES: So if you say, I’m going to hold the debt over here in a box, me, National Treasury, and you tell me what you’re going to do to make money every year.

As you make money every year, I’ve got to deal with you, which says, here’s the long-term capital repayment plan that arises out of your functional economy that you have now put together a plan for in normal circumstances, this is how we’re going to operate.

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You can assume you’ve got a full tank of petrol, go and drive as fast as you can.

You can assume you’ve got a competent ABS (anti-lock braking system) brakes functional racing car, get in the car and drive, and if you win the race – my analogy is getting a bit lost here – but what I’m saying is take that away from the evaluation of the plan.

You can’t sit with a plan that says, we’re going to fix corruption, we’re going to fix the finance, we’re going to fix electricity, we’re going to fix water, we’re going to fix debt, we’re going to fix waste. No.

Say, if those were working, how would I work?

Then separately and in parallel, you go and create teams and leaders, probably nationally or at least provincially, who can fill the tank, fix the brakes and do all of those things so that are you, the best drive, can run the fastest car.

JEREMY MAGGS: Mark Barnes, thank you very much indeed.

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