Introduction
State-owned enterprises, government departments and institutions have a significant role to play in the economy and transformation of South Africa. They must thus be efficient and well run with governance practices that are above reproach. Some of the challenges these entities face from a governance perspective are:
- "Role clarity: What is the role of the board of a state-owned enterprise vis a vis the responsible minister? Is the board in control of strategic decisions even in instances where they may have an impact on economic policy and national imperatives? How does government play its role as shareholder whilst enabling the board to run the business effectively? And what about government’s role as policy-maker in the broader legislative environment, which may then impact on the functioning of the state-owned enterprise
- Leadership: Is a special kind of leadership required for the effective performance of a state-owned enterprise?
- The independence of the board: How can this be achieved in a context in which the responsible minister makes the appointments to the board of the state-owned enterprise? Can the board deal with undue political pressure?
- Setting performance objectives: How does the board of a state-owned enterprise achieve good financial performance whilst simultaneously delivering on national priorities such as access by communities to electricity or water?
- Duties of directors: Whose interests do directors of state-owned enterprises serve – government, the directors’ constituencies or the enterprise itself? Can stakeholders like members of the community, the labour movement and customers, influence the direction of a state-owned enterprise without diluting the board’s accountability to act in the best interest of the company?
- Transparency: Is there an obligation on state-owned enterprises to be more transparent than other companies: How does one reconcile the need for public accountability and transparency with the imperative for commercial confidentiality?
- Public procurement: What are the essential elements of the procurement process that is efficient and minimises the risk of corruption?"
These issues lie at the heart of improved governance in state-owned enterprises and fundamentally influence their performance.”
The Power of Governance by Reuel J Khoza and Mohamed Adam 2005
SAICA recognises the growing governance responsibilities of public entities and will, in the future, be addressing some of these issues.
Protocol on Corporate Governance
The first protocol on corporate governance was published in 1997 and revised in 2002. It was intended to provide guidelines to state-owned enterprises on the implementation of corporate governance, as well as to provide a consistent standard for all state-owned enterprises to adhere to.
Download in Adobe Acrobat (1.8MB)
Public Finance Management Act (PFMA)
Act No. 1 (as amended by Act No. 29 of 1999)
The PFMA is aimed at securing accountability and sound management of the revenue, expenditure, assets and liabilities of public sector institutions. It applies to government departments, public entities (which include state-owned enterprises) listed in schedule 2 or 3, constitutional institutions, parliament and the provincial legislatures.
The PFMA specifies the fiduciary duties and general responsibilities of governing bodies, heads of departments, accounting officers, managers and employees of boards or the accounting authorities, and provides for personal liability where legislative duties are breached.
Download in Adobe Acrobat (100KB)