Hold delinquent board members of SOEs to account

QUESTION TO THE DEPUTY PRESIDENT BY STEVE SWART MP

“Whether he has taken any steps since 27 February 2018 to improve the lack of accountability and enforcement of sanctions against board directors and management of state-owned enterprises (SOEs), given their failure to comply with laws, codes and internal processes, as highlighted in various reports, including the Public Protector State of Capture report, as well as various Parliamentary inquiries, including that of the Portfolio Committee on Public Enterprises and that of the Ad hoc Committee on the SABC Board?”

REPLY BY DEPUTY PRESIDENT, MR DAVID MABUZA

“In the State of the Nation Address (SONA) the President highlighted some of the steps that have been undertaken at the time to address government’s failures in state-owned companies. Among others, he mentioned the following:

Action has been taken at Eskom to strengthen government, root out corruption and ensure that work to restore its financial position is implemented as a matter of priority. The Commission of Inquiry into State Capture, headed by the Deputy Chief Justice is expected to commence its work soon. This will ensure the extent and the nature of the state capture is established, that confidence in the public institutions is restored, and that those responsible for any wrong-doing are identified.

As part of the SONA implementation process, the following steps have been taken:

In respect of Eskom, a new board has been appointed, an acting CEO and CFO have been appointed to strengthen governance, disciplinary action has been taken against at least 8 senior managers to start the process of rooting out corruption and to stabilise the financial situation in Eskom. As action in terms of this intervention was intensifying, some of these individuals opted to resign from their positions before disciplinary hearing would even sit to determine their guilt. The process of appointing a full-time CEO and CFO is almost complete. The issues pertaining to coal supplies in some of the power stations is receiving attention as we speak.

All boards of state owned companies are in the process of being reviewed and strengthened. At Denel, changes have been effected with the announcement of a new interim board. So is the case with Prada. Boards of SOEs have been directed to focussing on all government failures that have impacted negatively on their performance. In addition, boards will prioritise recovery of stolen funds and undertake a review of all contracts to identify those that may have been improperly awarded. Where there are criminal offences, charges must be brought against those individuals through the relevant authorities to ensure that those that are involved are brought to book.

The instances of maladministration and corruption at state-owned companies identified by reports from the office of the Public Protector, including Parliamentary inquiries, have assisted a great deal in highlighting the extent of the problem and the Executive is taking these matters seriously.

In instances where forensic and criminal investigation have already been conducted, steps have been taken to ensure that individuals identified by this investigation at the board and executive level are removed through due processes, including suspension and the institution of disciplinary hearings.

The President will establish an SOC council and will announce its mandate in due course that will help strengthen the work of the state owned companies. This is work in progress. Progressively Ministers will be taking action to strengthen governance, accountability, transparency and improved performance and financial stability of our state owned companies as has been indicated before.

Sooner, rather than later, the dependence by SOCs on the fiscus must be totally removed. In fact, commercially owned SOCs should be paying dividends to government. We undertake to keep honourable members briefed as this programme of reform unfolds in these SOCs.”

SUPPLEMENTARY QUESTION BY CHERYLLYN DUDLEY MP (ON BEHALF OF STEVE SWART MP)

“I’ll be responding on behalf of my colleague, Steve Swart, who sends his apologies.  I have noted your response and am going to read from his response:

It is encouraging that various criminal investigations are ongoing against board directors and management of state-owned enterprises arising from the allegations of state capture. We are also pleased that the Hawks and Asset Forfeiture Unit have made progress in this regard and the AFU obtaining preservation orders running into millions of rand.

What is lacking, however, is the enforcement of sanctions of board directors and managers in terms of both the Public Finance Management Act as well as the Companies Act. Sadly, time after time, board members and management are replaced after running SOEs into the ground and are then redeployed to other SOEs.

The ACDP believes that besides holding those board members criminally and civilly liable for losses sustained by those SOEs, serious consideration should be given to have these directors declared ‘deliquent directors’ in terms of section 162 of the Companies Act. This will prevent directors who have failed to fulfil their fiduciary duties to SOEs from ever being able to serve as directors again. Would the Deputy President support these suggestions?”

REPLY BY DEPUTY PRESIDENT, MR DAVID MABUZA

“Well, it goes without saying that if you were a board member and certain things happened under your watch, obviously, somewhere, you must take responsibility. It is not enough just to leave your role as a board member. You must, at a certain point, account for certain things that have happened under your watch. So, I support that.

Thank you.”


QUESTION TO THE DEPUTY PRESIDENT BY STEVE SWART MP
25 April 2018