eskom

One of the elephants in the room at this year’s State of the Nation Address (SONA) was the conspicuous absence of any mention of the need to appoint the right people to the boards of state-owned enterprises (SOEs).

This is worrying because the President spoke at some length about the need for SOE boards to be based on “expertise, experience and integrity” (SONA 2018) and “credible, appropriately experienced and ethical directors” (SONA 2019), says Parmi Natesan, CEO of the Institute of Directors in South Africa (IoDSA).

“Why no mention of SOE boards and the importance of ethical and effective leadership this year?

The President said that 2020 would be the year of getting the fundamentals right, but one cannot think of a more fundamental building block than the quality of an organisation’s leadership.

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“As we all know, the crisis at our SOEs has deepened in the past three years, and the quality of the state’s appointments to the boards of some key SOEs remains a concern,” she says.

Government’s ability to turn thoughts and plans into reality also becomes questionable. A clear example of this gap between intent and implementation is the inexplicable delay in publishing the long-promised framework for the appointment of directors to SOE boards.

Government committed to finalising the framework by March 2018, and the IoDSA enthusiastically supported this move, giving input into the much-needed piece of work.

The framework was approved by Cabinet late in 2018, but the final version has still not been released for implementation.

The framework is of vital importance because the state, as sole shareholder, has the power to appoint directors, and often executives, at SOEs.

These appointments are sometimes based on patronage and/ or political expediency rather than what the SOE in question actually needs to fulfil its mandate.

To address this, Government should adopt the best practice recommendations outlined in King IV.

“SONA 2020 stressed that the priority was to stabilise the SOEs but it’s hard to see how this can happen if they do not have boards with the right skills, experience and independence.

“Public confidence is critical in supporting any economic recovery, and that will rely on general acceptance that SOEs have the right leadership, both at board and executive level and that the lines of accountability are clear,” comments Natesan.

“The IoDSA urges Government to take the steps needed to solve the leadership and governance crisis at our SOEs, and give its efforts to return them to effectiveness and provide them with the best chance of success.”