Government strengthening oversight on SOCs

Wednesday, October 4, 2017

Public Enterprises Minister Lynne Brown says processes are underway to strengthen her oversight role as a shareholder of State-owned companies (SOCs) to improve governance. 

The Minister was speaking ahead of the presentation of the department’s annual report at the Old Assembly Chamber in Parliament on Wednesday. 

She said the department’s challenge is to inculcate the principles of good governance practised within the department across SOCs. The Minister said events that have unfolded over the past year have demonstrated the need for a departmental structure that is agile, swift to respond to challenges at SOCs and capable of ensuring compliance. 

“The department should, in this financial year, complete a realignment process to significantly strengthen the tools at its disposal to exercise its oversight responsibilities.

“Lessons learned over the past year will also profoundly impact the terms contained in the shareholder compacts signed by the shareholder and SOCs in the future. 

“The 2016 Memorandum of Incorporation (MOI) differs from the 2014 version and it gives me, as shareholder, additional powers to act decisively to ensure the assets of the 54 million South Africans are looked after. The major change here is that the Minister has now been assigned the power to act against a Chief Executive Officer of a State-owned company should the need arise.” 

The Minister said the principles of the new shareholder policy to improve the performance of SOCs and sharpen government’s role as shareholder were approved by Cabinet in the last financial year. 

Minister Brown said in instances that company employees conspire among themselves to commit wrongful acts, the Shareholder relies on the company’s executive and board to spot the infraction and take the requisite action. 

Minister sheds light on Eskom 

The Minister believes that structures can be put in place to avoid a repetition of the ease with which Eskom appears to have been able to lie to its shareholder in respect of its dealings with McKinsey and Trillian. 

“I want to be very clear about this: I regard Eskom’s lies when asked to provide information to a Parliamentary question as an assault on our democratic system of governance. The opposition was entitled to ask the question and to receive a truthful response. Had a truthful response been forthcoming, and the facts of the relationship been exposed last December, appropriate action would have been taken to investigate by now,” she said. 

The Minister said she has since asked Eskom why the response provided to her in December differed from its recent responses on the McKinsey-Trillian matter. 

“Last night, I received a report from the board. I will read through it and ask the department’s Legal & Governance unit for its considered recommendations.” 

The Minister’s remarks come after Eskom board interim chairperson Zethemba Khoza announced the suspension of four senior executive members due to their alleged involvement in the McKinsey-Trillian relationship. 

After the interim board was appointed in June, the Minister – as a shareholder - immediately instructed it to initiate investigations into allegations of irregular conduct and to also take disciplinary action against members of the executive, if warranted. 

“This instruction accords with the shareholder’s responsibilities in instances where boards fail to act appropriately on such allegations. 

“Should boards fail to heed these directions, the shareholder has the right to intervene,” she said. 

The Minister said, meanwhile, that Eskom had come a long way compared to a position it was in in 2014. 

“We had continuous load shedding, the company was spending open R1 billion per month on open cycle gas turbines and its financial position precarious. This happened while the economy was bleeding. 

“Today, I can say that Eskom is on the path of a stable balance sheet.” 

Department obtains clean audit 

Ahead of the presentation of the department’s annual report, the Minister announced that State-owned entities needed to emulate the performance of the department. 

“Salient features include a clean audit report from the Auditor-General, and the fact that the department spent almost 95% of its budget, achieving 18 of 22 set targets. 

“Taking a step back, it is important to note that in my first year as Minister, the department had a qualified audit, followed by an unqualified audit and now the clean audit. This needs to be emulated at all SOCs in my portfolio,” she said. –