Codes of good governance at SOEs have to have sharp teeth
Legally binding guidelines for the recruitment of boards and CEOs will help prevent state entities from being ATMs
Someone once said our state-owned enterprises (SOEs) are theatres, because most CEOs of the major SOEs are “acting”. And with the resignation of Mark Barnes from the SA Post Office comes another acting CEO.
The cause of the high turnover of executives at our SOEs and in the public service in general, according to SA experience as well as internationally, is a poorly defined interface between administration and politics.
Politicians demand loyalty from administrators for good and bad reasons. Good, or at least understandable, reasons may include that politicians need to appoint competent people who also buy into the governing political party’s views and policies.
On the other extreme, corrupt politicians require pliable and loyal CEOs who will succumb to their demands, especially to enable influence and access to the supply chain — what is popularly known as tenders. The latter has totally dominated the SOE landscape since the late 1990s.
The procurement budget of the SOEs has increased dramatically from less than R230bn in the late 1990s and early 2000s to more than R500bn in 2017. The overall state budget has increased to more than R1-trillion due to burgeoning spending on infrastructure built from 2010, such as roads, railway lines, dams and power stations. More than 70% of the procurement budget is concentrated in the major SOEs, as defined in schedule two of the Public Finance Management Act: Eskom, Transnet and SAA.
They have become synonymous with an intricate web of government interference and corruption that has engulfed SOEs and the unrelenting pressure that has been put on their CEOs. However, we must not be deceived into thinking that the problem of interference and corruption lies only with the big SOEs. Indeed the smaller ones across various spheres of government have developed the same culture.
This culture of “unhealthy political interference” came from the need to uproot the old, corrupt apartheid civil service. A measured need to appoint loyal cadres, what is now called cadre deployment, was a reasonable practice then, and still is given the unfinished transformation project and the need to firmly establish a culture of good democratic and ethical governance throughout the public service.
However, lapses in oversight, where politicians got away with dishing out patronage through tenders, allowed a new culture to emerge where politicians perceived appointments to executive positions as an opportunity to wield power to influence and access tenders. With the ever-increasing procurement budget, this culture saw departments overseeing big SOEs becoming highly sought after by corrupt politicians.
The need to stifle the abuse of powers by politicians as executive authorities with excessive influence over accounting officers has finally been identified by the ANC and government. Good governance insulations straddle various pieces of legislation and practice notes, such as the executive ethics codes, the Public Finance Management Act and the Public Services Act.
However, the ethical dilemma looms ever larger as revelations are made at the various commissions of inquiry relating to corruption. It would seem that politicians have had unfettered access to SOEs at different levels of the organisations. This creates mayhem, turning SOEs into a free-for-all. Many SOEs are simply regarded by politicians as personal ATMs. Board members hand-picked by politicians frequently have no knowledge of the core business of the SOE on whose boards they sit. This has to stop.
On the other hand, “healthy political interference or intervention” can ensure that we have good and balanced leadership whose aim is to root out corruption, while working with competent leadership to ensure good governance and productive SOEs without overimposing on the SOEs’ leadership; following due process efficiently and dealing with genuine issues of viability and sustainability; and providing all the necessary support.
In striking this balance it is important that it be underpinned by ethics and transparency. The crucial element will be to build the capacity of politicians to understand the need for this governance balance and the whole issue of ethical leadership.
Quite often when politicians are appointed they are thrown into the deep end and have to rely on others, who may have nefarious motives.
The governance framework for SOEs needs to be strengthened and popularised so the public can hold politicians accountable when they engage in political interference.
The codes of good governance for SOEs, such as the guidelines for recruitment of boards and CEOs, must be made legally binding, with a strong consequence regime. By this I mean punishment for violating codes of good governance must really bite. This is how other nations have conquered the problem — they did not rely on prayer and hoping that corruption would end, but gave teeth to codes of good governance.
• Dr Mfeka, a development economist and former economic adviser to the presidency, is director at SE Advisory.