Appointment process of SOE board members under scrutiny
The ills being exposed at the state capture inquiry are ample proof the current system is flawed
Academics in SA have called for greater transparency in the appointment of board members at state-owned enterprises (SOEs), saying there should be a limited role for ministers and members of the executive.
The Dullah Omar Institute at the University of the Western Cape, with the support of the Open Society Foundation, is conducting research and advocacy work on the framework for the appointment and dismissal of board members at parastatals. The organisations say given the prevailing ills of state capture, there is a need for greater transparency in the appointment process.
SOEs in the country, particularly Eskom and Transnet, have been embroiled in controversy in recent years largely as a result of the appointment of inappropriate individuals as CEOs and board members, which facilitated state capture. The looting of SOEs is now being probed by the commission of inquiry into state capture headed by deputy judge president Raymond Zondo. Boards have been the central vehicle through which patronage has been dispensed and political control over tenders exercised.
The appointment process of SOE board members has largely been a politically negotiated process, with the line minister, the ANC’s deployment committee and the president all pushing to get their candidates appointed.
However, President Cyril Ramaphosa has embarked on a wide-ranging clean-up of SOE boards. Late in 2018, the government approved a national guide for the appointment of board members and CEOs of state-owned and state-controlled institutions that “responds to the presidential review committee on SOEs”.
Primarily it was meant to promote transparency, accountability and good governance practices in all organs of state.
In a working document, the Dullah Omar Institute argues that existing laws governing these board appointments are fragmented and do not demand the necessary transparency. The organisation contends that current laws give ministers unlimited discretion which, as testimony given to the Zondo commission is showing, is often abused.
“For years, government promised to better regulate these appointments but after more than a decade, the legislation on state-owned enterprises governance remains deeply problematic,” the organisation says.
Furthermore, the organisation points out that while recent changes at SOEs under public enterprises minister Pravin Gordhan can be seen as good news, these are still executive actions. It says there still has been no evidence of robust, transparent and public processes relating to these new board appointments.
“Executive action may be defensible to solve current crises, but in the long term, more legislative clarity, accountability and oversight is required.”
According to Dullah Omar Institute director Prof Jaap de Visser, the research’s overall purpose is an improved functioning of parastatals that will ultimately lead to improved service delivery benefiting all South Africans.
“In particular, we want to see an improved accountability structure for the executive leadership, legislative oversight over and public engagement with those SOEs.”
The research focuses on two key flaws in the appointment and dismissal of board members — the procedural issues and the substantive criteria used for appointing board members, said De Visser.
“Our aim is to suggest options for law reform, criteria for board membership and criteria for appointment processes that recognise the role of the public in these appointments.”
De Visser said currently the law for appointing boards of SOEs is fragmented as each company is governed by at least two, but often even three, different laws, as is the case with Eskom.
“This legal confusion over SOE governance creates conditions that enable state capture. President Cyril Ramaphosa in his state of the nation address emphasised the need to restore the integrity and capacity of SOEs. This ongoing research aims to contribute to that end,” said De Visser.