Pathological Corporate Governance Deficiencies in South Africa's State-Owned Companies: A Critical Reflection

Abstract

Globally, states use state-owned companies (SOCs) or public corporations to provide public goods, limit private and foreign control of the domestic economy, generate public funds for the fiscus, increase service delivery and encourage economic development and industrialisation. Particularly given its unique socio-political and economic dynamics, a country such as South Africa clearly needs this type of strategic enterprise. Yet, that does not mean that everything at our SOCs is as it should be. The beleaguered South African Broadcasting Corporation (SABC) has recently seen the resignation of board members, shareholder interference in its operational affairs, and a high turnover of chief accounting officers and other executive management members. Due to non-performance, it has also received several cash injections from its shareholder to enable it to continue to deliver its services. In addition, the shareholder minister took it upon herself to amend the SABC's memorandum of incorporation, conferring upon herself the authority to appoint, suspend or even dismiss key executive members. South African Airways (SAA), in turn, has had seven CEOs in less than four years, has had to be bailed out at a cost of R550 million, and has in addition been granted a R5 billion guarantee by the shareholder for a restructuring exercise. Other SOCs such as Eskom, the Post Office and Telkom have also experienced high board and executive management turnover, perennial underperformance necessitating regular bailouts, and challenges regarding the division of power between their boards and the various shareholder ministers. Another issue that seems to plague South Africa's SOCs is the appointment of board members and executive officials with questionable qualifications. By critically examining the corporate governance challenges besetting the SABC, SAA and Eskom in particular, this article seeks to explore the root causes of the corporate governance deficiencies of SOCs, and how their corporate governance can be enhanced. It is concluded that the challenges faced by the country's SOCs are twofold: firstly, the SOCs boards' lack of appreciation of the cardinal corporate governance rules, and secondly, the role of government as a single or dominant shareholder, which results in substantial political interference in the running of the SOCs. This dual problem requires a dual solution. To arrest the problem of poor corporate governance in SOCs, government as the shareholder should firstly appoint fit and proper directors, having followed a sound due-diligence process. Once it has established such properly skilled and competent boards, however, government should adopt an arm's-length approach to the affairs of the SOCs as a way of insulating these corporations from political interference.

Challenges faced by CEOs in executing turnaround strategies in state-owned enterprises in South Africa

“…Mutize and Tefera (2020) found Telkom to be one of the successful SOEs in Africa as a result of consistent profit after tax of more than R2.5 billion rands as from 2016. However, one has to take cognisance of the fact that, in the past, Telkom was bailed out several times by government because of under-performance (Thabane & Snyman-Van Deventer, 2018). There are other SOEs, such as Eskom, SABC and SAA, that are continuously receiving state bailout according to Thabane and Snyman-Van Deventer.…”

“…There are a number of challenges that South African SOEs are facing that impede their performance as mandated. The challenges in this regard can be attributed to corruption, poor leadership, political interference (Adam, 2013;Madumi, 2018;Mashamaite & Raseala, 2019;Thabane & Snyman-Van Deventer, 2018), a lack of governance (Mfeka, 2018), high turnover rate of CEOs (Kimanzi, 2021), ineffective financial, performance and accountability systems (Chauke & Motubatse, 2020;Raseala, 2018), as well as the lack of consequence management system and the instability of governance structures (Chauke & Motubatse, 2020). Kanyane's (2018) view is that all the Acts (e.g.…”

“…Sithomola (2019) argues that South Africa's SOEs are experiencing a catastrophic leadership 'bankruptcy' which has led to the loss of confidence and trust in their ability to play their central roles of development and revenue generation to sustain their operations. Adam (2013), Madumi (2018), Mashamaite and Raseala (2019), Thabane and Snyman-Van Deventer (2018) state that the failure of SOEs in South Africa is caused by, among others, poor leadership and performance, political interference, corruption, and ineffective performance management system. Coetzee and Bezuidenhout (2019) point out that the high unemployment rate, South Africa's downgrade to junk status, social unrest, service delivery strikes, among others, create a sense of urgency to hold the CEOs accountable for the performance of the SOEs.…”

Advancing the Exploration of Engaged Creative-Placemaking Amongst Universities and Communities for Social Cohesion in South Africa

“…In addition, a very small percentage of the privileged few have exhibited craft literacy, creating well-oiled machines and efficient systems. Unfortunately, most government departments, universities and public and private institutions are led by people who generally lack both craft literacy and craft competency in the different ways of approaching established problems (Stander and Herman 2017; Thabane and van-Deventer, 2018). Moyo (1988) posits that craft literacy is the innovative ability to come up with models and schemata that speak to existential realities and lived realities as a people.…”

Corporate governance in state-owned enterprises in Lesotho

“…A review of SOEs’ case studies on the African continent tells an all-familiar tale; operational inefficiency and ineffectiveness that is chiefly attributable to poor corporate governance. Examples are Kenya (Atieno, 2009; Ireri, 2016; Kamau, 2013; Kuria, 2015); Namibia (Limbo, 2019; Lwendo et al , 2018; Mubwandarikwa, 2013); Nigeria (Ahunwan, 2002; Krukru, 2015; Tsunabavyon and Orokpo, 2014) and South Africa (Kikeri, 2018; Matsiliza, 2017; Office of the Public Protector, 2014, [South Africa]; Thabane and Snyman, 2018; Thomas, 2012). The foregoing is not an exhaustive list but an exemplification of cases where instances of poor (bad) corporate governance have been documented.…”