Long road for new SOE law despite calls for urgency

State-owned enterprises need legal reform but it's a long way off. Picture: File
State-owned enterprises need legal reform but it's a long way off. Picture: File

Despite public pressure for urgency in addressing problems in state-owned entities (SOEs), there is still a long road ahead for government’s new law meant to regulate these organisations if the department of public enterprises’ annual performance plan is anything to go by.

In the performance plan it is envisaged that the Shareholder Management Bill, which will govern all SOEs, will only be passed into law in the 2020/2021 financial year.

Since 2013, when the Presidential Review Commission recommended one overarching law to govern SOEs, and later in the 2016/2017 financial year, when Cabinet approved a draft concept paper on the shareholder policy to inform such a law, the rot in SOEs has been exposed on various fronts – most notably at the Zondo Commission of Inquiry into State Capture.

Deputy Minister of Public Enterprises Phumulo Masualle, however, told MPs in Parliament last week it may be time to “up the pace” so that the bill can be approved sooner. Masualle said the SOE Council is expected to meet before the end of this quarter.

It is however not just time and pace that are the issues, but also what role government should play in the governance of SOEs that will muddy the waters when the bill is eventually released for public comment.

Civil society organisations have been making written submissions to the Zondo commission to assist with recommendations on how to arrest the dysfunction in SOEs such as Eskom, Prasa and Denel.

'Convoluted legal framework'

The Dullah Omar Institute at the University of the Western Cape recently made a written submission to the Zondo commission based on the institute’s ongoing research on board appointments and dismissals at SOEs. The submission provides information on the fragmented legal frameworks regulating SOEs and its board appointments, and gives context that may assist in analysing state capture in these entities.

In its research, the institute argues the financial and governance failures of SOEs are rooted in the “convoluted legal framework comprising of overlapping and often conflicting legislation governing SOEs”.

However, aspects of the institute’s recommendations appear to be at odds with government’s intentions as stated in the shareholder management policy.

Professor Riekie Wandrag, a member of the institute’s research team, argues that too much power presently resides with the minister in board appointments.

This centralisation of power results in an “untenable situation” where government is the majority or sole shareholder, the policymaker and the regulator of these entities.

During a panel discussion on SOEs hosted by the institute last month, Dr Tracy Ledger, head of research at the Public Affairs Research Institute, also raised the issue of who the stakeholders are in SOEs.

“At the moment we are caught up in the Zondo commission and it is all about corruption and theft. We should also be asking what the purpose of SOEs is when the political dispensation changes and the priorities of the organisation change. So, how do we include, over a long period of time, some kind of public interest or the public as stakeholders?

“I think part of this is that we need a separation between shareholder, regulator, the management and the board, and must then see how we can meaningfully integrate the public into that.”

'Public should be given some oversight control'

Ledger also raised the issue around who has insight into governance and oversight of SOEs. She proposed giving members of the public the right to attend board or council meetings, unless there is a specific reason they should be excluded.

“It can be good for transparency if we involve the public,” she said.

However, in its performance plan tabled in Parliament last week, the department of public enterprises described the policy, which is to inform the long-awaited bill, as a policy “meant to improve the performance of state-owned companies [and SOEs] as well as strengthen and sharpen government’s role as shareholder, regulator and policy maker” in the governance of these entities – clearly at odds with the hopes of civil society for this much-anticipated law.

Ledger agreed with the Dullar Omar Institute’s research that more attention should be given to how people get fired in SOEs.

“We found the way in which people get fired is almost more important than the way in which they get appointed. So we need as many checks and balances for dismissals as we have for appointments,” she said.

According to Ledger, the entire recruitment and employment process should be scrutinised to ensure people are not just dismissed with impunity and fired for “bad reasons”.

Wandrag said the bulk of employment-related cases in court were as a result of interference by the minister. She said there should be a proper process and this power should not just be with one person.

“There is no legal justification for the minister to be involved, or rather, in control of the appointment of executives.”

The institute’s recommendations include minimum requirements for prospective board members that are objective and provided for in law, inclusion of the public as a stakeholder, as well as stronger oversight muscle for Parliament and the office of the Auditor-General.

The budget vote of the department of public enterprises will be debated in Parliament on Thursday.

*This article was first published by Parlybeat

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