President Cyril Ramaphosa’s mission to fix troubled SOEs requires commitment and effort from his Cabinet, Boards of Directors and the responsible executives. As we have all come to know, SOEs are one of the single largest drains on the fiscus, with Eskom, SAA and Denel being unbale to meet their financial and operational obligations. Among the many crucial tasks in putting these institutions into good health is ensuring that they are run by competent individuals and boards who understand the mandate of these organisations.
In recent months, murmurs have surfaced about mandate creep on the side. Increasingly, it appears that government’s zeal to reform these organisations may have created a situation of unsustainable interference by members of Cabinet in the running of the affairs of these organisations. The resignation of SAA CEO Vuyani Jarana is rumoured, amongst other things, to be a result of shareholder interference, primarily by the Minister of Public Enterprises, Pravin Gordhan. Phakamani Hadebe at Eskom is also rumoured to have found the gig of running the company very difficult with the shareholder, again, Pravin Gordhan, breathing down his neck at every turn. This has been echoed by the Economic Freedom Fighters and the Black Management Forum. Speaking on the resignation of Jarana, BMF President, Mr Andile Nomalala called on black executives to not avail themselves for executive leadership positions in SOEs as they were increasingly becoming the death bed of many promising black executives’ careers. The BMF’s view is that government should not appoint black CEO’s in these positions if the government does not have confidence in their ability to run them successfully.
This brings into question the much-awaited work spec for the much vaunted Chief Reorganisation Officers that will be appointed to the Executive structures of struggling SOEs in need of government funding. It does not take rocket science to figure that Eskom, SAA and Denel will end with CRO’s. How their mandate will be structured will be something many will be looking at keenly. Any overlap of roles between the CRO and the CEO is likely to lead to further accusations of government interference. Everything we know thus far about the mooted role of the CRO’s points to the CRO playing the role of shareholder defender and executor. Where does that leave the CEO? What about the Board? Does it mean the CRO will have the authority to override the decisions of the CEO? Does it mean the Board will no longer be responsible for strategy? All of these are critical questions which the government should think carefully about as no right-thinking CEO will avail themselves for an opportunity to be neutered by a commissar of government within the executive structures of the company. By all appears, the envisaged role appears straight of Chinese management modules which allow the Communist Party of China to deploy Commissars into SOEs to ensure the interest of the party is integrated into SOE programmes.
Speaking during the SONA, Gordhan remarked that “the situation within our SOEs requires special measures, which shall include greater intervention from the shareholder if the boards and management do not take the steps needed to deliver on the outcomes expected of each company”. All good and true. Except, who becomes accountable for decisions taken in the event where the shareholder assumes the right to run the organisation? Is it perhaps not the case that the Minister misinterprets his role as shareholder representative? Is the government not taking an overly expansive interpretation that ultimately, conflicts with the provisions of the Companies Act and the Public Finance Management Act? Are we not, by blurring lines of responsibility, creating fertile ground for Zondo 2.0 in ten years time? In the wrong hands, the current overzealousness by the shareholder could prove entirely detrimental to SOEs. Government is currently taking advantage of the mood of despondency around SOEs to engineer interference mechanisms that can and will hurt the integrity of SOEs in the long term, as the running of these institutions will have shifted, de facto, from the Boards of these companies, to government Departments who, truly speaking, do not know the first thing about running complex and large commercial organisations that SOEs are.
President Ramaphosa has done well thus far, to restore public confidence by getting rid of incompetent and compromised boards, cancelling illegal contracts and bringing in qualified executives. However, in order to retain qualified and competent executives, appointed Ministers need to trust the executives and Board of Directors, and not subject them to political dictates.
It is clear that these are no ordinary times for SOEs and therefore, extraordinary measures are needed to rescue them from their quagmire. In trying to clean up SOEs, the government should tread carefully not to repeat the deeds of the past administration, especially concerning the exaggerated- involvement of politicians in the operation of these institutions.