PRESS RELEASE: The Dullah Omar Institute makes submission on SOEs to Zondo Commission

Cape Town, 11 July 2019 - The highly centralised power to appoint boards of South Africa’s state-owned enterprises (SOEs) needs to be dispersed. This is one of the recommendations made in a recent submission by the Dullah Omar Institute (DOI) to the Zondo Commission of Inquiry into allegations of State Capture.

In the 25-page submission made public today, the Institute extensively draws on its ongoing research project on SOE boards. The second research paper in this project, focusing on board appointments at ESKOM, PRASA and the SABC was released on 4 July.

The recommendation to disperse the highly centralised power to appoint and dismiss SOE board members is particularly relevant given the Department of Public Enterprises’ intent with the much-anticipated Shareholder Management Bill. In its Annual Performance Plan for the 2019/20 financial year tabled in Parliament recently, the department again noted that the intention with the original Shareholder Policy is to “strengthen and sharpen government’s role as shareholder”.

The DOI submission argues SOE Boards represent both a critical layer of accountability and oversight over the entities’ administration and the all-important link between the state and the SOEs. SOE failures must therefore be attributed to failed leadership at board level and bringing the appointment criteria and procedure of board members (by the relevant Minister) under the magnifying glass. Board members are appointed by the relevant shareholder Minister, ostensibly in consultation with Cabinet. This, however, has proven to be problematic and does not represent the ‘robust and transparent’ process as recommended for good corporate governance by the King IV Report. These appointment procedures are a function of the problematic triplicate stakeholder role of government being shareholder, industry policy maker and regulator combined into one. This has created a breeding ground for corruption, the submission reads.

In calling for dispersing the power to appoint and dismiss board member, the DOI argues this can be achieved in two main ways. The first is to use distinct and different structures to do vetting, handle nominations and recommend appointments to the executive. The second option is to diversify the structure handling the appointment process, which is essentially the principle underlying the Judicial Service Commission (JSC), which appoints judges and has representation from several sectors such as judiciary professional associations, the executive and the legislature. A structure representing diverse interest groups limits the extent to which an individual or a particular interest group can dominate decision-making.

Other recommendations include:

  • The need for one piece of overarching legislation regulating the governance and procedures of SOEs to ensure that there is consistency;
  • The requirements for SOE board directors need to be objective and clearly articulated in law and minimum requirements must be set for board membership; and
  • The appointment processes must be transparent with opportunity for meaningful stakeholder input.

Member of the DOI research team Prof Lukas Muntingh said with the submission the Institute wants to provide the Commission with information on the problematic legal frameworks regulating SOEs and more specifically the appointment of Board Directors. “We hope the submission will provide useful context that can assist in the Commission’s analysis of State Capture and the development of recommendations, especially as it relates to the appointment of SOE Board Directors.” Muntingh said the Institute is committed to working towards solutions that will ensure greater stability and transparency in the governance of SOEs.

END

For the full submission click here.

For further comment contact:

Jacob Nthoiwa: knthoiwa@uwc.ac.za +27 67 678 0888

Motlatsi Komote : mkomote@uwc.ac.za +27 72 872 2200

Lukas Muntingh : lmuntingh@uwc.ac.za +27 21 959 2950

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