Picture: SUPPLIED
Picture: SUPPLIED

The recent uproar over executive resignations at the major state-owned corporations (SOCs) have generated anger, exasperation, Solomonic wisdom and comments from all and sundry.

SOCs have the ability to be drivers of sustainable development or harbingers of economic deterioration. Eskom and SAA should be jewels of the developmental state, but the reality is they are in ICU and threaten to bring the walls of Jericho down with them. This means everyone is entitled, actually duty bound, to have their say on the way forward and propose solutions to prevent them for crippling our economy further. The fortunes of our republic depend on the viability and performance of the key SOCs.

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This crisis must be used as an opportunity to do what is right and appropriate. In change management we say a good crisis must not be allowed to go to waste. It must provide us with a platform to implement change. The consensus is that ministers of state as shareholder representatives must not get involved in the details of how SOCs are managed, even those in ICU. But I can’t imagine any sensible shareholder who would not keep a close watch over their investments in ailing companies. If they depend on public money, ministers must be hands-on and interfere when necessary.

With SOCs no individual has skin in the game.  We need to have a new approach that is better suited to SOCs.

In SA we subscribe to good corporate governance principles that require a separation of powers between shareholders, the board and management, but this is derived from the running of private companies. In the private sector, when all is equal and each party does what it is supposed to do, we have an excellent corporate governance environment. But when aberrations such as Steinhoff and Tongaat happen, don’t we wish the shareholders were the interfering type? Maybe if somebody had asked more difficult questions these corporate governance scandals would not have happened. By the time they were asked the horse had bolted and we were faced with cleaning up major corporate governance scandals.

We make the mistake of equating SOCs with real shareholder-owned companies, yet corporate governance principles designed for privately owned companies are not suited to appraising and assessing enterprises in which there are no individual shareholders hit in the pocket when things go wrong. With SOCs no individual has skin in the game.  We need to have a new approach that is better suited to SOCs. There is no point blaming a minister of state if they object to an SOC CEO implementing a politically untenable strategy like retrenching staff or freezing salaries in the middle of an election season. This is especially so when the state was itself the cause of the financial meltdown, as at Eskom.

Basic stakeholder management nous would have anticipated that the minister would get involved in such a decision despite the existence of a board appointed to exercise oversight. A minister and the state itself cannot be blamed for insisting that those who receive money from the fiscus must comply with the laws and regulations set out in the Public Finance Management Act. You cannot accept bailouts of public money and expect to be exempt from the rules of the fiscus.

The Black Management Forum has cautioned its members not to apply for executive positions in SOCs because their hands get tied behind their backs. And it is hosting a summit to highlight the obstacles SOC executives face and to present potential solutions. Meanwhile, the president has met with the CEOs of the key SOCs, presumably to reassure them. Yet commentators continue to opine that ministers should be disciplined for ignoring the existence of the boards they appointed; the markets are jittery, and the populace is worried. This is a crisis crying out for a solution.

Insisting on private sector solutions to public sector problems will amount to letting the crisis go to waste. The government wants a developmental state and wants its corporations to contribute to the realisation of a capable state. This obliges all of us to adopt a different perspective on the governance of the SOCs from that of private companies. The time has come for a decisive push for the government to implement the recommendations of the presidential review commission on state-owned enterprises, which were tabled as far back as 2013.

The main recommendation of the commission was that the government should enact a single overarching law, a State Owned Entities Act, to govern all SOCs. This must supersede all current legislation governing SOCs, reduce the burden of compliance with multiple laws and include all subsidiaries of SOCs.

If we get this law enacted, the recent high-profile resignations of two SOC CEOs will not have gone to waste. The situation will have been properly used to contribute to the development of SA. The crisis will have served as a platform for the implementation of necessary changes.

• Letlape is a corporate governance consultant at Letcom Consulting and author of The Dream Delivered.