ENOCH GODONGWANA: Membership of ANC NEC does not preclude development bank role

2020/09/01 17:52:00

ENOCH GODONGWANA: Membership of ANC NEC does not preclude development bank role

ENOCH GODONGWANA: Membership of ANC NEC does not preclude development bank role

I am an ANC member who has been elected to leadership positions, but I am not an employee of the ANC or any government department

Development finance institutions must be held to the same governance standards as publicly listed companies — the boards of such institutions must act in the best interests of all stakeholders, funders, employees and suppliers.There are many people in SA in the category of “politically exposed persons” or “domestic prominent influential persons”, and a rigorous system of compliance is required by law to ensure the proper regulation of their activities.

It was never the intention of the relevant legislation — such as the Financial Intelligence Act — to preclude such persons and their family members from conducting their daily lives and the honest pursuit of their livelihoods. What is required by the legislation is the kind of enhanced scrutiny that allows for the careful assessment of the sources of wealth and funds of such persons.

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.Published by Arena Holdings and distributed with the Financial Mail on the last Thursday of every month except December and January.31 August 2020 - 05:05 President Cyril Ramaphosa.This column first appeared in Daily Maverick 168 CLOSE Having penned a strongly worded seven-page letter to the party’s rank and file membership, a week ago, the president was clear that corruption will not be tolerated and that he had drawn a line in the sand.

As a board member of the DBSA, I am guided by the same fiduciary duties as other board members. I follow the same good governance principles as my fellow board members, and if and when any conflict arises it will be dealt with formally, in the same manner as such conflicts would be dealt with by other board members. Development finance institutions must be held to the same governance standards as publicly listed companies — the boards of such institutions must act in the best interests of all stakeholders, funders, employees and suppliers. Given the fractious nature of ANC politics, it was never going to be an easy project to unify the different factions in the party. There are many people in SA in the category of “politically exposed persons” or “domestic prominent influential persons”, and a rigorous system of compliance is required by law to ensure the proper regulation of their activities. It was never the intention of the relevant legislation — such as the Financial Intelligence Act — to preclude such persons and their family members from conducting their daily lives and the honest pursuit of their livelihoods. Instead of joining the fight against corruption, the anti-Ramaphosa grouping is mobilising against him.

What is required by the legislation is the kind of enhanced scrutiny that allows for the careful assessment of the sources of wealth and funds of such persons. There can be no clearer case to be made for this than the lead-up to a meeting of the ANC’s national executive committee at the weekend. It is in this context that the proper regulation of the activities of politically exposed persons via the compliance systems of the banking and financial sectors is of fundamental importance, and such persons should be prepared to submit themselves to lifestyle audits to help stamp out corruption. Since 2012, the World Bank has published surveys about development finance institutions such as the DBSA. Its 2017 report assessed a number of key features of such institutions, including their ownership, mandate and governance practices. The responses to the letter came from obviously hostile quarters in terms of the party’s divides, with the most notable being that of former president Jacob Zuma. It was found that the government fully owned 85% of those surveyed and 10% had minority private sector participation of 1%-49%. This is our reality.

It was further found that 75% of such entities were established by legislation and 25% were set up as companies. These institutional differences have important implications for the mandate and governance of development finance entities. The reality is, however, that the ANC’s ability to protect individuals under the guise of the collective necessitates exactly that: rebuking the collective and demanding that it fix its ways. Historically, development finance institutions have been established for economic reasons, such as to address scarcity of financing and to deal with other market failures. Governance structures Some institutions have narrow, specific mandates, such as infrastructure development, promoting small, medium and micro enterprises (SMMEs) or mass housing. Some have broad mandates, formulated in general terms without reference to any particular sector, such as promoting social and economic development.   It was the ANC in KwaZulu-Natal that cut to the heart of the matter when the provincial leadership had to do damage control over the appointment of Gumede. But to a depraved organisation that is the ANC and its morally bankrupt leadership, the Gumede issue is nothing more than an issue that they can easily explain away.

Mandates are typically reviewed from time to time to ensure institutions remain relevant and continue to be fit for purpose even under changing circumstances. Worldwide governance structures of development finance institutions are complex and are typically integrated with political oversight mechanisms. The World Bank report found that in 74% of the cases, a government entity, such as the ministry of finance or president of the country, appoints board members of development finance institutions, and in 54% of cases, CEOs are appointed in a similar manner. “We are not united for the sake of unity,” Ntuli said. In line with this, the DBSA board is appointed by the finance minister after approval by the cabinet. Over time, SA’s various finance ministers have used different mechanisms to ensure transparent and fair appointment processes. Accountability sits at the heart of any democracy.

Some have used advertisements and then made recommendations to the cabinet.. Others have used executive search companies to find candidates to recommend to the cabinet. The DBSA, like most development finance institutions, is not capitalised by the state and as such it must go to the markets to raise capital. In the competitive environment for scarce resources, the DBSA has to meet stringent governance protocols comparable to its private sector competitors. Infrastructure fund The DBSA thus has long-established and strong processes for managing any conflicts of interests that may arise for its board members. Not even Ramaphosa, no matter how well-meaning he may be, will change that.

Good governance is at the heart of the DBSA’s work. This is a situation I inherited when I became DBSA chair — I lay no claim to it. The ANC and the government have decided to put infrastructure at the centre of the country’s economic recovery plan. We do need to be careful that the DBSA — not Enoch Godongwana — does not find itself in a conflicted situation. Correctly, there is a concern that it may not be appropriate for the DBSA to house the infrastructure fund because the institution may wish to participate in funding some of the planned infrastructure projects. So basically the ANC’s national executive committee is split into two factions — one supporting Ramaphosa and the other one firmly behind Magashule.

This matter has been raised by the banks and the Association for Savings and Investment SA and by the National Treasury. The DBSA is alive to this criticism and is of the view that these concerns should be considered in deciding how the infrastructure fund is ultimately housed and institutionalised. It is not the first time ANC leaders have been deployed to a state entity. One of my predecessors as chair of the economic transformation committee was appointed CEO of Denel. In another case, Saki Macozoma, a member of the ANC’s NEC, was deployed as group CEO of Transnet. Instead, it’s the other way round.

A notable difference is that in my case I am serving not as an executive but in a nonexecutive capacity for the DBSA. In the examples cited above, we never experienced any conflict of interest problems. In fact, quite the opposite; the debilitating problems of corruption and state capture did not arise while these respected comrades served as leaders of our public entities. • Godongwana chairs the ANC’s economic transformation committee and is nonexecutive chair of the DBSA. . Unlike the two Limpopo ANC leaders who are directly implicated in VBS-related corruption, Maphefo-Letsie and Maneli stand accused of failing to act against officials who invested millions of public funds in the collapsed VBS.