One of the key aspects of the State Asset Management SOC Ltd that will own all of 700 state-owned enterprises in South Africa entails the duties of the shareholder.
Under normal circumstances, the Companies Act and the King Code of Good governance dictate that the shareholder selects, elects, and appoints the board of directors, whether that company is owned by the state or the private sector.
In a public company, where there are many interested stakeholders, the process of appointing all directors and the top executives must be transparent.
A public company is not a family business or a domestic company that serves the narrow interests of a particular individual or family according to their
esoteric and arbitrary tastes.
All companies succeed based on the quality of the board of directors and the calibre of the Chief Executive Officer(CEO), Chief financial Officer (CFO), Chief operations officer (COO) and executives. Normally the shareholder elects the best qualified board and leave the appointment and supervision of the executives, including the CEO, CFO and COO, in the hands of the board of directors.
Shareholders should not appoint the CEO, CFO, COO, and other senior executives. Again, once the best suited CEO is appointed, they must be given room to appoint the best executive team without disturbance from the board. After all, the CEOs must not have room to complain that they were given duds and non-performers by someone else.
The declining poor performance and failure of our state-owned enterprises is directly correlated with the poor quality of board members and senior executives in these enterprises since 2008.
The main problem is that the ministers and the ANC deployment committee have been consistent in appointing wrong people to crucial positions to pursue sectarian, corrupt and unproductive interests at the expense of the state.
The minister, representing the shareholder, has been able to veto any politically undesirable candidate, while approving politically suitable ones even when the merits of the candidates signal prospective failure. Minister Pravin Gordhan has distinguished himself in this.
Gordhan appointed Jabu Mabuza as chairman of Eskom without following pre-determined or credible recruitment, selection and appointment processes.
No objective tests of credentials were done, just a friendly phone call over the weekend and the following week Mabuza was appointed chairman of Eskom with devastating consequence to the Southern Africa Development Community economy (SADC).
The appointment of former Eskom CEO Andre de Ruyter by Gordhan and President Cyril Ramaphosa was also a disaster, also because De Ruyter was working with an equally dubious board of directors. As we speak, the board of Eskom has found a prospective CEO and recommended the CEO to Gordhan and he has rejected the choice of the board and demanded that three candidates must be put forward.
The process of selecting a CEO should be a board process and the minister must rely on the board for selecting the best CEO who will bring them success. That process of selecting a CEO is not subject to new and arbitrary interventions and vetoes by anyone.
This problem of unnecessary and unjustifiable political interference is still going to do damage to the proposed State Asset Management SOC Ltd.
To avoid this dangerous practice, the minister must be restricted only to the appointment of the board members of the State Asset Management SOC Ltd and not of the CEO and executives, and the minister must not appoint the board members of the actual state-owned
enterprises.
The board of State Asset Management SOC Ltd should ideally be appointed by a committee of say seven people designated for that job for five years. This board must have one representative of the state (presidency), one representative of the SA Institute of Chartered Accountants and five others from the registered
professions such as advocates, engineers, health professionals, among others, with equal voting power.
Recruitment, selection, and election of board members must be guided by the Public Services Commission with published guidelines. No one must sit on more than one board of the SOEs.
Objective sound analysis must be done of the problems and opportunities in the SOE sector, and a menu of possible solutions must be tabled for the nation to consider – not the bill – but the business case and a pre-feasibility study.
We need a report that shows us in detail what we have benefited and lost with all the privatisation and corporatisation since 1994, including Iskor, Telkom, South African Railways, General Post Office and so on. It is my view that we have lost more than we have gained with all previous interventions in the SOE sector and any rushed and unstudied intervention will cost us even more.
- Swana is a member of the 70s Group and a political analyst
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