SOE directors should be appointed in transparent process
If we accept that most of our SOEs are in crisis, then we need to change the way we have been doing things
With the perennial leadership instability at most of our nation’s state-owned enterprises (SOEs), coupled with the resultant decline in public confidence in these institutions, perhaps it is time the government departs from the current practice of appointing both executive and non-executive directors of these parastatals.
All directors, be they executive or non-executive, should in future be appointed through a transparent process similar to the one used when making judicial appointments.
The process of making judicial appointments involves calling for nominations and holding public interviews. Then the president, after consultation with the chief justice and leaders of parties represented in the national assembly, chooses the judges from a list of candidates drawn up by the Judicial Service Commission (JSC).
A transparent and competitive process similar to that of the JSC would help achieve two important goals.
President Cyril Ramaphosa set a precedent in 2018 when he decided to depart from the previous practice and set up an advisory panel to oversee the process of appointing the new national director of public prosecutions.
Currently, the power to appoint and remove a CEO of an SOE is bestowed on the board, in consultation with the relevant cabinet minister. The board members are themselves generally appointed by the relevant ministers in a rather opaque process that is based in part on the ministers’ discretion.
A transparent and competitive process similar to that of the JSC would help achieve two important goals: ensuring that whoever emerges as the suitable candidate is a person the public can have confidence in; and that only fit and proper candidates are considered.
Though "fit and proper" generally refers to an individual with integrity and high ethical standards, a public interview process would also sift out those who may be ethical but lack the requisite experience to lead such large corporations. Being ethical and possessing the requisite skills and experience are not mutually exclusive.
In the past, and probably even now, some parastatal directors have had only one of these two qualities. This pitfall has contributed to some of the crises that continue to bedevil many of our ailing SOEs.
During my five-year tenure as Eskom spokesperson, I couldn’t help but conclude that some of the board members were out of their depth when it came to governance issues, and that Eskom was probably their first or biggest assignment.
Based on the evidence that has been submitted to the state capture commission and the parliamentary inquiry, it looks as though some of Eskom’s executives and senior managers took advantage of this gap to enrich themselves, their family members and politically connected individuals. Hopefully, the truth will come out in the fullness of time.
Similarly, some of Eskom’s CEOs, including some of the interim CEOs, were seemingly not yet ready for the rigours that accompany such a position. Their weaknesses were similar to those exploited by those who wanted to capture the state and siphon the resources of the country.
In one instance, Eskom sent two contradictory letters to McKinsey and Trillian, the first demanding that they pay back the R1.6bn that was unlawfully paid to them, and the second saying there was no need to pay back the money. It was only after the current board was appointed and rescinded the second letter that McKinsey was essentially forced to pay back about R1bn of their share.
The high court has recently ruled that Trillian must pay back the remaining R600m.
One of the unintended but welcome consequences of a transparent interview process would be the appointments of executives and non-executives who do not owe their positions to the ministers to whom their SOEs report.
This process would also assist in addressing the perceived or real notion of political interference by some cabinet ministers.
The current opaque process of appointing board members and CEOs has in part given rise to allegations that some ministers go out of their way to appoint board members who are weak, inexperienced and pliable so they can control them for nefarious reasons.
"You never want a serious crisis to go to waste," said former White House chief of staff Rahm Emanuel.
If we accept that most of our SOEs are in crisis, then we need to change the way we have been doing things. And what better way to show commitment and seriousness than by grabbing a buffalo by the horns and changing the way the appointment of directors of state-owned enterprises is made?
There is no better way than appointing such directors through a transparent process that does not diminish the powers bestowed on the ministers and the boards.
Phasiwe is former Eskom national spokesperson.