Potential of energy SOEs cannot be released in a leadership vacuum
Minister has started the process of filling vacancies on boards and in management
The department of mineral resources & energy is an economic department and it must contribute to economic growth and development, and job creation.
Operationally, and through its entities, which are extensions of its capacity to implement government policy, the department should meet this objective.
Entities, as the largest recipients of the budget share, are to execute the mandate of the government, in line with national needs and government priorities. It is therefore necessary that they are positioned to carry out this responsibility.
As observed, almost all the energy state-owned entities (SOEs), including boards, lack proper governing structures and systems. Among the weaknesses at the core of the inefficiencies and ineffectiveness of our entities are:
- Failure to recruit and appoint senior personnel into key positions in the executive. A strategic entity such as PetroSA has been without a CEO since 2014.
- Entities and boards are led by acting CEOs and acting chairs. In some instances, there were anomalies, where personnel acted as chair of the board and acting CEO simultaneously, resulting in an absence of checks and balances. It should be appreciated that a lack of permanent people in key executive positions creates instability in the organisation and uncertainty for the person who is acting, and for the company’s present and future planning.
- Incapacitated boards due to a number of vacancies, foremost the lack of quorum and capacity. That has resulted in their inability to ensure effective oversight, take decisions and fulfil their fiduciary duties.
- Inadequate spread of skills and expertise. Among the boards are individuals with similar professional qualifications, weakening the capacity and effectiveness of the board.
Cognisant of the critical nature of these entities, ensuring good governance is an imperative. Failure would mean that the state is unable to fulfil and perform its mandate and responsibility.
Our entities are of great value to the economy and the country. Failure to tackle governance challenges, to ensure the availability of critical skills to manage facility maintenance and to ensure capture of global market share means the entity will continue to perform suboptimally and lose out to the country’s competitors.
Further, and critically so, these weaknesses will adversely affect the health-care system and industry in SA. There should be a new way of doing things.
In the case of the Central Energy Fund group of companies, the individual units in the entity should work together. They should complement each other with the strong being able to assist the weak — the way the Strategic Fuel Fund could benefit PetroSA, and vice versa.
The reality is that, despite being in one family, each unit operates as if others do not exist. As a result, they overlook their interconnectedness within the strategic energy complex. Complementing each other would enable them to collaborate on the security of the energy resources of the country in the areas of storage and exploration.
Reimagining our entities further means that those units that can be profitable should be enabled to do so. The prevalent view that SOEs will perpetually run to the state coffers for bailouts while ignoring their duty to contribute to profitability and economic growth should be a thing of the past.
In addition, profits accruing to the entity should be ploughed back by way of improving infrastructure and facilities, improving capacity and capabilities and growing the market share of the units.
Undoubtedly, in a chaotic, unstable and leadership vacuum situation, this cannot be realised. Governance will enable the creation of a new culture and the development of a strategic vision and will ascertain execution, so there will be a clear focus on operational requirements across the institution, in terms of skills capacity and financial risks.
Phil Parker of the Chartered Quality Institute, in the paper “The Importance of Good Governance”, highlights the benefits of good governance as efficient processes, visibility of errors, reduced costs, smooth running of operations and conforming of products in the market.
In addition, there is the development of a culture of excellence; reputational improvement; organisational clarity and financial sustainability.
This rationale underpins the actions taken by the minister. After numerous meetings, the entities were directed to advertise the vacant posts in the boards and the executive structures. This process has begun in earnest, starting with the Central Energy Fund, to be followed by the Nuclear Energy Corporation of SA, the National Energy Regulator of SA and so on.
Former president Nelson Mandela observed: “South Africans have no concept of time, and this is also why we can’t solve poverty and social problems.” For rapid economic growth and development we should recognise that time is of the essence.
• Lekorotsoana is chief of staff in the department of mineral resources & energy