How to keep SAA, PetroSA, Eskom away from politicians

The state capture report reveals a governance crisis at state-owned entities. Experts weigh in on how this came to be and what to do about it.

2022-01-19 06:00:00 AM

How to keep SAA, PetroSA, Eskom away from politicians - The state capture report reveals a governance crisis at state-owned entities. Experts weigh in on how this came to be and what to do about it.

The state capture report reveals a governance crisis at state-owned entities. Experts weigh in on how this came to be and what to do about it.

“When you do reforms in a private company you need to clean up the executive and get new people, a new board. In SOEs this is difficult because the minister (who is usually a political deployee) appoints the board that is sometimes not fit for purpose,” Gumede said in an interview. 

Qobo noted: “The only way we can insulate SOEs from political interference as well as ensuring that they have a firewall protecting them is by restructuring the SOEs and removing them from government oversight.”Less than a year ago, PetroSA’s board was dissolved amid financial difficulties. The company last reported a profit in 2013,

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What happens to this Zimbo mgigaba now that it's divorced...deport asap! Electricity is up 35% in the last two years due to IPP's. WMC must stop meddling in SOE's and will run fine. The most undoing suffered by SOE's had been the privatisation economic policy shoved down this hastily established government under corruptible boards of the 'corporated' management answerable and pliable to politicians!

👀 explain in OnlyFans terms What to do about it. It's about 10 years too late to have this discussion. There is nothing left to steal so they move on to ongoing orders and contracts and future government programmes like national health . They are kleptomaniacs. Politics is there vehicle.

that South African SOEs are systematically corrupt and need “shock therapy” for true reform.  RELATED  ANC: A corrupt party culture leads to a corrupt government “When you do reforms in a private company you need to clean up the executive and get new people, a new board. In SOEs this is difficult because the minister (who is usually a political deployee) appoints the board that is sometimes not fit for purpose,” Gumede said in an interview.  Political overreach in SOEs is so rife that it can bring down countries if not expeditiously attended to, Gumede added. One example is that of the ingrained interference at Eskom, which is overstaffed at all levels, and the power of its unions.  Eskom has to deal with unions if it wants to cut staff, in this case the National Union of Mineworkers, which supported President Cyril Ramaphosa into presidency and which is crucial to his re-election this year.  Qobo noted: “The only way we can insulate SOEs from political interference as well as ensuring that they have a firewall protecting them is by restructuring the SOEs and removing them from government oversight.” To insulate them against political overreach Qobo proposes the establishment of an independent holding structure or supervisory authority staffed with private professionals, with government having representation.  “If you look at PetroSA and the Central Energy Fund, they have been under the supervision of the minister of energy. Those are crisis-ridden SOEs and the minister is responsible for the mess in those SOEs.” Gwede Mantashe has been the Minister of Mineral Resources and Energy since 2019. Less than a year ago, PetroSA’s board was dissolved amid financial difficulties. The company last reported a profit in 2013, Bloomberg previously reported. A plan to remove the political chokehold “We assume that politicians, even the well-meaning ones, understand corporate governance and the responsibilities that come with it. They may even do damage as they try to do right. … Certain corporate governance norms don’t allow a certain level of overreach by politicians,” Qobo said.  Professionalisim SOEs could be the reform that is needed, added Qobo. “That means you need to keep [SOEs] out of the clutches of politicians because today you may have a well-meaning politician and tomorrow, in that same portfolio, you may have someone who will abuse those powers, as we have seen with the previous ministers in the department of public enterprises, Malusi Gigaba and others that have come out of the Zondo Commission.” Zondo mentioned Gigaba in his report, saying Gigaba’s denial of involvement and interference at Eskom and SAA must be rejected.  “Mr Gigaba had interfered in Eskom’s operations on many occasions,” the report stated.  William Gumede sais the risks connected with the collapse of governance at SOEs “is what we are seeing now where entities such as SAA or Denel cannot sustain themselves and have to be bailed out, to the detriment of the country, and eventually they collapse”. “If these SOEs were private companies they would have been closed down and gone into bankruptcy, but because they are public and there are politics around them, they are being bailed out,” he added.  Weak boards Qobo said besides political interference being an issue, weak boards are also a cause for concern and lead to governance issues at SOEs.  “The second layer of weakness is at board level and having people who are not fit or suitable for those roles, people who are not ethical and who don’t have the appropriate skills and competence to be in the governing body of the SOEs,” said Qobo.  Zondo said boards used their powers to corrupt the SOEs, which they have been appointed to protect, and the misconduct was often evidenced by the abuse of centralised procurement processes. This meant that the approval authority for high-value tenders became concentrated in the hands of a small group of top executives and board members.  At Transnet, for example, by centralising procurement decision-making, it was possible for parties inside and outside Transnet to collude in the awarding of contracts and to enable individuals to make certain procurement decisions.  Zondo said the centralisation of approval authority at the level of the board and senior management had the effect of shielding procurement processes from the scrutiny of a wider group of Transnet officials, who could have detected and reported irregularities. “SOEs are guaranteed by the national treasury, so when corporate governance fails it means that the risks are magnified, the lines of accountability are poor, financial management probably has lots of holes and the contracting processes are likely to be dubious,” said Qobo.  Gumede explained that to fix the procurement process all procurement would have to be halted. Companies that are overpriced and without the necessary skills would have to be cut out. He suggested it would be evident that many of those companies had links to ANC leaders.  “There is then going to be a fight because at every level of government procurement is locked into ANC structures and this is difficult to reform. The public thinks, ‘Let’s just appoint a new chief executive and things will change overnight.’ No. There are blockages and that is why people quit and leave,” Gumede said.  Anathi Madubela is an Adamela Trust business reporter at the Mail & Guardian