23 February 2017

South Africa: Improve Your Oversight Over State-Owned Companies - Committee Chairperson

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If there are no consequences for the mismanagement of procurement policy, among other things, the application of the turnaround strategy at any company will be rendered useless, the Chairperson of the Select Committee on Communications and Public Enterprises, Ms Ellen Prins, told the Deputy Minister of Public Enterprises, Mr Bulelani Magwanishe.

Mr Magwanishe and the senior officials of the department appeared before the Select Committee on Communications and Public Enterprises to explain to the Committee, among other things, the department's oversight responsibilities over state-owned companies, especially on corporate governance, board appointments, remuneration of executives, risk and audit committees.

Ms Prins emphasised the importance of officials having to face consequences where mismanagement, fraud and corruption have taken place. "You can't hope for the delivery of good results from the turnaround strategy if the culprits of mismanagement and corruption, for example, don't face consequences," said Ms Prins.

She told Mr Magwanishe that it is impossible to achieve any good results with only 200 staff members keeping an eye on state-owned companies under the watch of the department. "No wonder you are unable to even identify revenue shortfall risks and furthermore, your oversight role is unclear," she said.

Members of the Committee expressed their unhappiness about the "poor" state of corporate governance and management at most state-owned companies. The South African Express Airlines (SAEA) was singled out as an example. Members of the Committee highlighted serious problems at SAEA that included poor maintenance of the company's airliners. They said to fly with the SAEA airliners is a risk, given the poor maintenance of its aircraft.

Members of the Committee also asked Mr Magwanishe and the senior officials of the department about how the department and the company boards determine bonuses to the company executives. They told Mr Magwanishe that it was unacceptable that the executives at SAEA and other poorly performing companies get large bonuses but the companies are not doing well. "How do you determine the performance of the executives?" members of the Committee asked.

The department was told to work on its risk oversight and irregular expenditure to improve the evolution of state-owned companies. "The misconduct that is taking place in state-owned companies is a problem and as a Committee we want to know what are you doing or what have you done to resolve the problems that Eskom and other state-owned companies are experiencing?" asked Ms Prins.

Members of the Committee told the department to remedy many systems, including procurement at state-owned companies such as Eskom, Transnet and Denel that are currently experiencing huge debts because of irregular expenditure.

According to the members of the Committee, Denel is now under the oversight of the Department of Defence and Military Veterans. But the department told the Committee that Denel is still under the Department of Public Enterprises.

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