21 Potchefstroom Elec. L.J. 1 (2018)

handle is hein.journals/per21 and id is 1 raw text is: 

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Tebello Thabane
Elizabeth Snyman van Deventer


University of Cape Town
University of the Free State
South Africa



Date of submission

2 May 2017

Date published

8 January 2018

Editor Prof 0 Fuo

How to cite this article
Thabane T and Snyman-Van
Deventer E Pathological
Corporate Governance
Deficiencies in South Africa's
State-Owned Companies: A Critical
Reflection PER/ PELJ 2018(21) o
http:i/dxd oi.o rg 10.17159/1727-
3781/20181v21 iUa2345


http://dx.doio rg/l0.17159/ 727-
3781/2018/v21 iOa2345


Globally, states use state-owned companies (SOCs) or public corporations
to provide public goods, limit private and foreign control of the domestic
economy, generate public funds for the fiscus, increase service delivery and
encourage economic development and industrialisation. Particularly given
its unique socio-political and economic dynamics, a country such as South
Africa clearly needs this type of strategic enterprise. Yet, that does not mean
that everything at our SOCs is as it should be. The beleaguered South
African Broadcasting Corporation (SABC) has recently seen the resignation
of board members, shareholder interference in its operational affairs, and a
high turnover of chief accounting officers and other executive management
members. Due to non-performance, it has also received several cash
injections from its shareholder to enable it to continue to deliver its services.
In addition, the shareholder minister took it upon herself to amend the
SABC's memorandum of incorporation, conferring upon herself the authority
to appoint, suspend or even dismiss key executive members. South African
Airways (SAA), in turn, has had seven CEOs in less than four years, has
had to be bailed out at a cost of R550 million, and has in addition been
granted a R5 billion guarantee by the shareholder for a restructuring
exercise. Other SOCs such as Eskom, the Post Office and Telkom have
also experienced high board and executive management turnover,
perennial underperformance necessitating regular bailouts, and challenges
regarding the division of power between their boards and the various
shareholder ministers. Another issue that seems to plague South Africa's
SOCs is the appointment of board members and executive officials with
questionable qualifications. By critically examining the corporate
governance challenges besetting the SABC, SAA and Eskom in particular,
this article seeks to explore the root causes of the corporate governance
deficiencies of SOCs, and how their corporate governance can be
enhanced. It is concluded that the challenges faced by the country's SOCs
are twofold: firstly, the SOCs boards' lack of appreciation of the cardinal
corporate governance rules, and secondly, the role of government as a
single or dominant shareholder, which results in substantial political
interference in the running of the SOCs. This dual problem requires a dual
solution. To arrest the problem of poor corporate governance in SOCs,
government as the shareholder should firstly appoint fit and proper directors,
having followed a sound due-diligence process. Once it has established
such properly skilled and competent boards, however, government should
adopt an arm's-length approach to the affairs of the SOCs as a way of
insulating these corporations from political interference.


State-owned companies; corporate governance; deficiencies; South
Africa; SAA; SABC; Eskom

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