Directors welcome SOE reform

Cape Town – The Institute of Directors in Southern Africa (IoDSA) on Monday issued a statement welcoming government’s recently released guidelines for reforming the country’s state-owned enterprises (SOEs).

Parmi Natesan, senior governance specialist at the IoDSA, said key parastatals provided the vital enabling environment for economic growth and “many of the challenges currently experienced by SOEs can be traced to inadequate governance”.

She highlighted some key governance issues for SOEs that now formed part of government’s reform plan. She said a key cause of SOE malfunction was undue interference by the state, including short-circuiting the process for board and executive nominations and issuing instructions based on political grounds.

“If boards are to be accountable for the performance of the SOE, then they have to have the freedom to exercise their collective judgement in its best long-term interests,” she said. “The shareholder must, of course, spell out what the goals of the SOE are, but then it must allow the board and executive management team to do their jobs.”

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Natesan added boards needed to have the right mix of knowledge, skills and experience, and making appointments on political grounds alone had been “a recipe for underperformance at best, and disaster at worst”.

“SOEs have a unique economic and developmental role, and that must be incorporated into the skills matrix that guides board composition,” she said. Natesan also said board performance should be evaluated regularly so that the shareholder could understand how well the board was functioning as well as what governance areas needed to be addressed. “ Governance is receiving such attention globally because it improves performance,” Natesan said.

“South Africa is a leader in this field – let’s hope that government finally benefits from our home-grown expertise to get our SOEs back on track.”