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Lifting the fog on SAs SOEs
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Eskom, Denel, the SABC, SAA… SOEs (state-owned enterprises) have made headlines repeatedly in the previous years, with few South Africans seeing much light at the end of the proverbial tunnel… or any light at all really, thanks to scheduled load-shedding. Arguably, however, there are reasons to be optimistic. The period before the elections provides the ideal time for good governance to start to turn various dire SOE situations around. And we're already seeing evidence of this.


Think of why the Auditor General (AG) requested greater powers to deal with the reluctance of many SOEs to rectify the recommendations of the AG. These include irregular and unjustified spending eroding the budgets of SOEs and SOCs. With irregular spending hitting the R51-billion-mark, AG Thembekile Kimi Makwetu is putting clear principles behind processes to curb the 'flow', with President Ramaphosa's backing. The signing in of these new law amendments to the Public Audit Act shows a shift: the 'fog' is lifting, systems are changing, and corruption will no longer be tolerated. As Minister Pravin Gordhan has warned, the 'kickbacks' and resistance from corrupt parties will have to be dealt with.

The state of our SOEs is the result of a leadership and resource crisis.

As a young democracy, there's been a strong effort to administer good governance, especially as we've found ourselves competing in a tough global market. However, there has also been – particularly in recent times – sustained fractious undermining of these efforts, culminating in state capture.

This has been a severe setback. In Has South Africa lost R700 billion to corruption since 94? Sintha Chuimi and Anim van Wyk Africa Check, Feb 2081 have indicated that it is difficult to assess the real figure.  However, it is possible that considerably more has been lost because of loss of opportunity and money going out the country, it has also created a web of misinformation, blame games, propaganda and intimidation and loss of productivity that is difficult to quantify. It's only now that we have the benefit of hindsight can we can begin to fully appreciate the extent of it. The financial and human costs are huge. South Africa needs to regain its soul. To do this we need a complete change of mind-set.

How to turn SOEs around

2016, 2017 and 2018 reports by the Auditor General (AG) show that the state of SOEs has deteriorated in the last four years. Wasteful expenditure increased by 200%. Irregular expenditure perpetuated, with R33.5-billion not accounted for in people's budgets. The AG report of 2017/2018 lists multiple reasons for the deterioration, including: poor decision-making, neglect and inefficiencies. But there is good news. It's possible to improve the situation if there is the collective will to do so.

Here are some of the ways to turn SOEs around from a leadership perspective, in my opinion, including some outlined by the AG:

    1. Leaders need to be open about their choices. Transparency is essential to re-earn trust. Leaders must lead in the best way to get the right results.
    2. We need to improve human turnaround. Constantly retraining people for critical positions is costly, breaks continuity, and can cause damaging knowledge gaps.
    3. Leaders need to conduct themselves in the manner expected of them. If they don't, there must be enforced consequences. The AG's new powers to punish poor performance and transgressions is a positive step towards this. Good administrative structures are often the best barriers against corruption.
    4. Communication systems and processes must also be improved with the value of continuous feedback loops emphasised. There needs to be an ongoing dialogue between all levels from the ground up. Open communication helps foster trust.
    5. We need to provide ongoing high-level training to enable leaders to oversee all facets of SOEs. 
    6. We need to improve the quality – and regularity – of reporting to improve transparency.
    7. The lack of infrastructure in SA is setting us competitively back against Africa and the world. Public-private partnerships are essential to address this.
    8. We need to hire competent, good quality leaders through a stringent and fair evaluation process. Track records must be checked, and integrity, as well as competence, should be assessed. The election of the board is pivotal. Plus, there needs to be a rigorous induction and succession process.
    9. If boards don't have certain competencies, they need to bring in these missing skills.
    10. We must positively motivate people through affirmation. If we can collectively inspire people to perform at a higher level – as with the Total Quality movement in India – then the results can be staggering. Excellence should be incentivised. Poor performance should not be rewarded

To turn around the effects of poor boards/governance bodies the first step would be to ensure that the board/governing body becomes a powerful, cohesive leadership group capable of turning around the 'State Capture' mindset and fostering resilience. Each board must be committed to and seen to uphold the same principles and values and be governed by the same rules. Rules and expectations need to be clear, simple and enforced. The board would benefit from having an overarching vision of what delivery of mandates should look like and ensure that executives have a clear path to getting there. The board then needs to systematically monitor progress, advice the executive and only intervene in cases where the organisation is at risk before the crisis happens.

The fog is lifting. We're getting greater clarity on corruption and hopefully and in a shorter time than usual, take the necessary steps to weed it out. If we can't succeed on getting our SOEs back on track, then we made need to other alternatives to the current set up that will work better to the advantage of the people of South Africa.  Although each SOE must be considered on a case-by-case basis, the government must have clearly spelt out feasible policies and ethics that apply to all of the entities that it owns and governs. The simpler and easier to enforce, the better.


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Lynn McGregor is a senior fellow at the Centre for Corporate Governance in Africa, a senior partner at Convivium, a company that specialises in the evaluation and development of boards and top executives. She is a key note speaker and writer. Her areas of expertise include the human aspects of corporate governance such as decision making; board dynamics, coaching and mentoring Chairs, CEOs, and developing boards and senior executives in the private sector as well as state-owned entities



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