President Cyril Ramaphosa. Picture: Moeletsi Mabe
President Cyril Ramaphosa. Picture: Moeletsi Mabe

President Cyril Ramaphosa’s announcement on Friday that nonexecutive directors of state-owned companies will be "removed from any role in procurement" is expected to have a profound effect on systemic corruption, which has flourished over the past decade.

State-owned entities (SOEs), particularly Eskom and Transnet, have been engaged in huge infrastructure expansion, over which board members have wielded increasing influence in decision making.

Newly appointed Eskom chairman Jabu Mabuza said he had been alarmed to discover the existence of a board tender committee and although it had been constituted along with all other board committees since the new board was put in place he had written to Public Enterprises Minister Lynne Brown expressing concern about its desirability and mandate.

Over the past decade, appointments of board members of SOEs have become a politically negotiated process with the line minister, the ANC’s deployment committee and the president all jostling to get their candidates appointed.

Boards have been the central vehicle through which patronage has been dispensed and political control over tenders exercised.

In his speech, Ramaphosa said he would "change the way boards are appointed so that only people with expertise, experience and integrity" would be eligible to serve.

Mabuza said while best practice allowed boards of directors in the private sector to review procurement decisions over a particular threshold, directors did not have the knowledge to make decisions about customers, suppliers or staff.

At Eskom, the board tender committee has been integrally involved in decisions on coal supply, for example.

Board tender committees in state-owned companies were first established when the companies were corporatised in the late 1990s and are contained in their memorandums of incorporation, which sets out the responsibilities of the board to the shareholder minister.

Ramaphosa also promised to review the funding model of SOEs and, in what was a clear reference to Eskom, said the companies "could no longer borrow their way out of financial difficulties".

His comment, and those by Mabuza in January that Eskom’s capital structure was unsustainable, will open the way to discussions on private ownership or participation in state-owned assets, on which the ANC has always been ambivalent

Going into Wednesday’s budget, Ramaphosa has given the go-ahead to a commission of inquiry into tax administration and the governance of the South African Revenue Service (SARS), which would be appointed soon, "to ensure that we restore the credibility of the service and strengthen its capacity to meet its revenue targets".

This comes after Finance Minister Malusi Gigaba asked former president Jacob Zuma in November to set up an urgent judicial inquiry into the revenue service, which has been plagued by corruption allegations and has lost significant amounts of expertise over the past three years since Tom Moyane was appointed its commissioner.

SARS’s failings and a decline in tax morality have contributed to revenue shortfalls on a scale not seen since the financial crisis, putting pressure on public finances.

The tax advisory committee headed by Judge Dennis Davis recently completed a report on tax administration and identified flaws in SARS, but the committee does not have judicial powers to subpoena witnesses so is constrained in its ability to probe allegations of misconduct.

Davis is expected to be a candidate to head the commission.