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Government in the dark over resignation of execs at SOEs

Transnet has seen a spate of resignations from its management and board. File photo

Transnet has seen a spate of resignations from its management and board. File photo

Published Oct 20, 2023


The government remains in the dark on the reasons why a number of executives and board members have quit their posts in key State-Owned Enterprises (SOEs), in spite of the potential negative impact this might have on investors.

Minister in The Presidency Khumbudzo Ntshavheni yesterday said that Cabinet had thus far not discussed the exodus of executives and board members.

This comes after the resignations of Transnet Group CEO Portia Derby and chief financial officer Nonkululeko Dlamini at the end of September, which was followed by Sizakele Mzimela, the head of Transnet Freight Rail (TFR), a week later.

Transnet also lost its former chairperson, Popo Molefe, who resigned from the board last week, while Mpho Makwana also quit as Eskom chairperson.

The two SOEs at the forefront of electricity and logistics crises are now both without permanent CEOs, as Eskom has not permanently replaced Andre de Ruyter, who left in February.

In the post-Cabinet media briefing, Ntshavheni admitted that these resignations did not paint a picture of stability within the investor community and government lenders, who are fickle over volatile corporate governance.

However, she said executives resign at one point or the other for a variety of reasons, citing Dlamini for not being lost in the public service after she joined another SOE, Telkom.

“It is not the place of the government to say whether they resign or not. The place of government is to ensure that there is immediate restoration of stability. What is important is the work that must be done to stabilise those two entities urgently and with speed,” Nthsvheni said.

“The impact of those is not very good. But you will recall that there have been demands from the private sector, in particular, as it relates to Transnet, about the executives that they must move on and they are not stabilising the environment.

“So, it must be read in that context that we are committed to the stability of the two entities given the challenges that that were confronted with, the challenge of load shedding.

“Eskom needs to have a CEO and also needs to have a chairman who is fully committed to Eskom. But secondly, Transnet, given the logistics challenges the country it is confronted with, will need to have a stable executive management team and also a stable board.”

Ntshavheni ended by saying that the Minister of Public Enterprises, Pravin Gordhan, was continuing to work with other stakeholders to ensure the stability of these entities.

However, Gordhan has drawn severe criticism for the unprecedented governance chaos at executive and board levels in SOEs, as most entities were either operating with interim boards, acting CEOs or with no executive heads at all.

Last week, Business Leadership SA (BLSA) said the plans to fix Transnet and Eskom depended fundamentally on business and government being able to work with boards and strong management teams in both entities.

BLSA CEO Busi Mavuso said the beginning of the dysfunction that besets the SOEs was the fact that the CEOs were appointed and dismissed by a minister who can, under the organisations’ memoranda of incorporation, ignore the board in the process.

“The minister, as the shareholder representative, should be able to select directors of the businesses in line with the Companies Act,” Mavuso said.

“But those directors must then be empowered and be accountable for the performance of the entities. Right now, that cannot happen in SOEs because the boards are dis-empowered on the most critical decision they should be making.”

The Institute of Directors South Africa (IoDSA) has also echoed similar sentiments about the complex governance issues relating to the appointment of senior management at SOEs.

IoDSA CEO Professor Parmi Natesan said governance best practice was for the board to appoint the CEO so that he or she was accountable to the board.

“The challenge is that SOEs have enabling legislation or founding documents which often stipulate that the government has the power to appoint senior management, as well as the board,” Natesan said.

“King IV recognises this and suggests in the SOE supplement that the board be fully involved in the appointment of the CEO and that both parties agree that the CEO is accountable to the board, not the Minister, as representative of the shareholder.”