The department of public enterprises, the custodian of South Africa’s state-owned companies, wants to increase the power of the minister over parastatal boards by giving him the authority to dissolve them and step in when things go wrong.
State-owned companies have been plagued by governance problems, mismanagement, corruption and financial instability for more than a decade.
In a presentation to parliament’s portfolio committee on public enterprises on Wednesday, the department said it was engaged in redrafting the memoranda of incorporation for state-owned companies to enable greater “step-in rights” for the minister.
The changes will “empower the minister to intervene when the board is seriously underperforming by dissolving the board and appointing a ‘quasi’ administration to turn around the company,” reads the presentation.
The conditions for stepping in could include where the company is in financial distress or there are allegations of maladministration and mismanagement; where there are material governance challenges; when the company fails to perform efficiently or effectively; or when the company has acted unfairly or in a discriminatory manner or has failed to comply with their own legislative framework or policies.
State-owned companies are governed by their own specific laws as well as by the Companies Act and the Public Finance Management Act.
The memorandum of incorporation, which has been concluded separately with each company by the shareholder minister, sets out the detail of the relationship and their respective powers and obligations.
Legislation gives the minister of public enterprises the power to appoint the board as well as the CEO, on the basis of a recommendation by the board.
The power to remove the board is ambiguous in many instances, which has led directors who have been removed to take the government to court to insist on reinstatement.
The legal framework is intended to enable the boards to function independently, free of political interference. But political interference has nonetheless been extensive, leading to much conflict between the minister, the directors and management.
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