Created: 04 June 2019
The Black Management Forum (BMF) calls for black executives not to apply for senior appointments within state-owned companies (SOCs), including those of Chief Executive Officer (CEO) and Chief Financial Officer (CFO), until the government has developed a clear governance framework for these critical public institutions. This governance framework must also outline the role of the minister of public enterprises, who has clearly overreached his authority and behaved like a de facto CEO within some SOCs.
The BMF is shocked by the resignations of two seasoned black executives – Mr. Phakamani Hadebe and Mr. Vuyani Jarana from Eskom and South African Airways (SAA) respectively - within the past two weeks. “There was a time when some SOCs were reasonably well-run under the leadership of black people such as Reuel Khoza, Thulani Gcabashe and Peter Matlare. However, SOCs have become a slaughterhouse for skilled black leaders and executives whose reputations get tarnished because of factors that are beyond their control” says BMF President Andile Nomlala.
“ It has come to our attention that other black leaders and executives are on the verge of also submitting their resignation letters due to intolerable levels of political interference and the failure of the government to fully support them and address the capital structures and funding models of their struggling SOCs. We would like to have an urgent meeting with the government to address these issues” continues Nomlala.
The BMF believes that there are six issues that the government must urgently address:
- Resolve the unique governance conundrum within SOCs where boards and executives must report to multiple government departments with changing ministers who frequently work in silos and do not agree with each other. There must be clarity about the roles of the shareholder, the line Ministers, the board and executive management. For example, at Eskom there are two task teams (the presidential sustainability and ministerial tasks teams) and three ministries (National Treasury, Public Enterprises as well as Minerals and Energy) that all have overlapping areas of responsibility for company policy, which can send confusing signals to the board and executives.
- Clarify the role of the Minister of Public Enterprises in turning around SOCs. The government cannot run SOCs it can only supervise them. We note the public humiliation of Hadebe, when the Minister of Public Enterprises reversed an executive decision to freeze salaries.
- Identify governance and legislative impediments that curb the agility of SOCs by slowing down decision-making processes. This prevents them from responding to the ever-changing market conditions. Examples include the multiple reporting lines mentioned above and laws such as the Public Finance Management Act. There is a need to streamline the governance and legislative framework to delegate authority to boards and executive management. This is critical, especially in the crisis that many SOCs are in at the moment.
- Address the capital structures of struggling SOCs. These are shareholder decisions that must be addressed urgently. Black executives cannot turn SOCs around if there is no clarity about the measures that will be taken to reduce their levels of debt.
- Develop funding models for all SOCs, some of which must deliver on costly public mandates. We note with concern that many SOCs struggle to pay monthly salaries. The situation cannot continue. There could be a separation of public and commercial activities at SOCs such as the South African Broadcasting Corporation (SABC) and the South African Post Office (SAPO) with the fiscus funding public mandates and the private sector participating in commercial activities. The government cannot continue to give guarantees for SOCs to borrow on capital markets to fund public mandates. Where the government has approved a corporate turnaround plan, as was the case with SAA, it must provide funding.
- Revisit the composition of SOC boards and ensure that there are sufficient people with industry expertise on them. The government should stop recycling the same names when it appoints board members. There are now thousands of black professionals who have honed their skills within the private sector. For example, there are approximately 13 000 black Chartered Accountants in SA and half of whom are black women. The BMF believes that there should be a strategic deployment of black professionals to SOCs. The government could consider establishing a public-private panel to advise and implement a policy of strategic deployment.
The BMF will convene a forum of seasoned black professionals to develop recommendations to the government on the restructuring of SOCs.
Andile Nomlala – BMF President
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About the Black Management Forum
The Black Management Forum (the BMF) has been in existence for 43 years. It is a thought-leadership organisation with the main purpose of influencing socio-economic transformation in our country, in pursuit of socio-economic justice, fairness and equity. The BMF stands for the development and empowerment of managerial leadership and the creation of managerial structures and processes that reflect the demographics and values of the wider society.
For more information, please contact:
Black Management Forum