Change coming to boards and governance of SOEs, including Denel


Denel, the State-owned defence and technology conglomerate, is one of a number of SOEs (State-Owned Entities) expected to soon have a second draft of a new shareholder oversight policy.

Deputy President Cyril Ramaphosa, who heads the Inter-Ministerial Committee (IMC) on SOEs told the National Council of Provinces (NCOP) one of the primary aims of the new policy was to improve governance at SOEs.

At its recent financial results announcement Denel indicated five board members had resigned. They were part of a new board announced by Public Enterprises Lynne Brown in July 2015 as a rotation and among the first actions they took was to suspend the then chief executive, Riaz Saloojee, along with chief financial officer, Fikile Mhlonto, and company secretary Elizabeth Africa.

Denel currently still has an acting chief executive – Zwelakhe Ntshepe – and recently named Odwa Mhlwana as chief financial officer and Vuyo Xaxa as group company secretary.

Answering a question in the NCOP, Ramaphosa said government “was currently in the process of reforming SOEs”.
“Some of the recommendations adopted include finalisation of the Private Sector Participation Framework for Infrastructure Delivery, the Framework for the Costing of the Development Mandate, the Remuneration Framework as well as the Guide for the Appointment of Persons to Boards and Chief Executive Officers of State Owned Companies.
“Once these are fully implemented, SOEs will reclaim their role as drivers of growth and transformation, a goal also envisaged by the National Development Plan (NDP).
“This cannot be achieved unless we strengthen the governance of our SOEs. To this end, the IMC will submit to Cabinet the second draft of the Government Shareholder Oversight Policy (GSP) to clarify mandates and regulate lines of accountability.
“The draft policy outlines the rationale for continued state ownership in key sectors of the economy and makes proposals for alternative ownership models.
“Implementing a new shareholder oversight model will be a radical change in governance and operations of SOEs to be competitive and regain investors and public confidence,” he said.

The Deputy President said all SOEs must ultimately be financially sustainable and have a positive impact on the economy.
“We want SOEs to have qualified and ethical boards and competent staff. The appointment of Boards must follow a well-planned, formal and transparent procedure applied across the different SOEs.
“Our target is to promote transparency in the appointment of boards and increase accountability, sound administration and good governance practices in all organs of state.
“By providing a conducive environment, state-owned companies (SOCs) can become drivers of investments and job creation; they can become technology enablers and they can lead a skills revolution in this country,” Ramaphosa said.

Given Denel is currently managed by a board numbering half of what it should, close and careful attention should be given to nominations submitted as per a request by the Department of Public Enterprises.

Potential candidates, according to Minister Brown’s department, must be suitable to serve on a board by virtue of their qualifications, expertise and experience in any of actuarial services; assets and liabilities management; audit; governance; economics; energy; engineering; environmental science; financial; forestry; human resource management; information communication technology; strategic leadership; investment; legal, legislation and litigation; project management; manufacturing; marketing; risk management and transport logistics.

They must also be committed to fairness, equity, access, openness and accountability as well the Constitution of South Africa.

In addition to the board changes at Denel, there have been a number of top-level management changes effective 1 September, with several new heads of divisions.