SA’s state-owned enterprises are coming under tremendous pressure to extricate themselves from their financial woes. Any kind of bankruptcy event cannot be the answer because of the obvious cross-default impact such a declaration will have on debt and other instruments in the capital markets. It will also be catastrophic for the government’s standing and credit rating.
But what does the role of a CRO entail given the political environment the SOEs must navigate in SA? This requires an understanding of the role of CROs, why are they required and what they can and cannot do. How does a CRO go about delivering a successful turnaround? Many causes can be attributed to the failure of the SOEs: poor management and direction from the board of directors; high levels of corruption; high costs of operations; corporate inertia and lack of policy; and failure to spot and deal with changes in the market. The recognition and appointment of a CRO to the SOEs is attributed to their recent history, where none other than management can be blamed for their plight.
Take the following scenario: if the turnaround plan requires job reductions, the CRO should be allowed to implement and pilot the job restructure without political pressure and influence. Naturally, it will be for the board to adopt the new restructure if it is in the best interests of the future “optimal performance and profitability” of the entity. If they are not able to make such difficult decisions, CROs will be nothing more than figureheads.
Without consensus driven from a foundation of credibility and trust, the complexities and intricacies of a restructuring plan will not be achieved. What if the banks hold out or trade unions refuse to accept job reductions ? The CRO should be granted executive powers . That will lend credibility to the process and put the CRO on the same playing field as the rest of the board.
Unfortunately they have already failed. Essential services such as healthcare and education cannot be delivered because of expensive governance issues and corruption at the SOEs. The government needs to set a goal that an SOE must be self sustaining within a yr or face disposal
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