Mass management of SOEs not a solution
Sello Masha Rasethaba
GOVERNMENT departments have been bombarded with offers from the private sector and non-profit organisations to volunteer to assist in the running of SOEs. The latest offer to the Treasury comes from members of the presidential chief executive initiative, to assist Eskom with corporate governance and various other technical skills.
Just imagine the Chamber of Mines volunteering to run Eskom’s coal utilisation programme. Whose interest will volunteers from the Chamber of Mines serve, their members who are dominating the supply of coal to Eskom or Eskom itself ?
In my opinion, these are the functions best left to the board and management of the SOEs who have duty of care and fiduciary duties in terms of the relevant acts such as the Companies’ Act, Treasury Regulations, the PFMA and other statutory requirements.
If an SOE is involving volunteers and the volunteer organisation have an appreciation of these core values, then experience for the volunteers and the organisation is more likely to be a positive one.
The most important issue here is knowing what motivates volunteers. According to a charity organisation from Ireland, Fingal Volunteer Centre, “knowing what motivates someone to volunteer is important in assessing whether you can meet their expectations.
“For example, if someone says they want to volunteer to meet people, then the volunteering opportunity must involve working with others. Sometimes people can’t pinpoint exactly what has motivated them, so you may have to dig a little so check your opportunities suit. “A volunteer’s original motivation for joining is not always the same as their reason for staying, so it’s always worth asking what motivates them to volunteer.”
This will help to alert the beneficiary of such voluntary work of the motives of and unlikely things these volunteers might like to try.
The questions are, do we need volunteers at SOEs, or do we require managers in SOEs with leadership skills and business acumen? Does the government have the necessary tools to monitor the performance of SOEs? Does the government as a shareholder give the necessary support and space to the leadership and management of SOEs to do their job without interference?
It has been proved that there are elements of poor leadership and management in SOEs. The ever-changing business environment and the dynamics of sophisticated economic exclusion of black people in the South African economy require that an SOE manager possess leadership skills. Jack Welsh said it very well. “We have to undo a 100-year old concept and convince our managers that their role is not to control people and stay on top of things, but to guide, energise and excite.”
Important roles In his address, President Jacob Zuma on the occasion of the celebration of the 97th anniversary of the ANC and launch of the 2009 election manifesto in East London on January 10, 2009, said that “SOEs and Development Finance Institutions (DFIs) have important roles to play in achieving the goal of a better life for all. These institutions must have clear and concise developmental mandates. “
Zuma went on to state that the people of South Africa have stated clearly that the DFIs are not easily accessible and that they often seem to be competing with commercial banks. He went on to state that “as agents for public service delivery in important areas, such as energy and transport, these SOEs cannot have the same regard to profit maximisation as private entities.” He further said that they cannot at the same time, perpetually run at a loss.
“They must have high standards of service delivery and be key drivers in terms of meeting industrial policy objectives.”
In his reply to a parliamentary question in Cape Town last week, Deputy President Cyril Ramaphosa and chairperson of the Inter-Ministerial Committee (IMC) said: “SOE reform aims to stabilise finances, governance and operations, among other things and has developed several measures to advance the reform of SOEs. I am afraid the IMC does not have the capacity to implement these noble reforms and is therefore not in a position to stabilise finances and operations of SOEs because that is not their job. “The IMC’s activities will further destabilise the environment and create confusion in SOEs leadership and management. We all know what happens to leadership when there is a vacuum at the top. I guess the offer to volunteer by members of the steering committee of the presidential chief executive initiative is to fill this vacuum.”
Both the private sector SOE volunteer programme and the IMC initiatives are not the best solutions to the leadership and management problems in SOEs. I suggest that the government create a body similar to the Chinese State Assets Supervision and Administrative Commission (Sasac), modelled after Temasek Holdings in Singapore to manage and control state interests in SOEs. Sasac performs investor’s responsibilities, supervises and manages state-owned assets of the enterprises under the supervision of the Chinese central government and enhances the management of the state-owned asset. Among other functions, Sasac:
Supervises the preservation and increment of the value of the state-owned assets of the supervised SOEs.
Establishes and improves the index system of the preservation and increment of the value of the state-owned assets, and works out assessment criteria.
Supervises and administers the preservation and increment of the value of the state-owned assets of the supervised enterprises through statistics and auditing.
Is responsible for the management and remuneration of the supervised enterprises and formulates policies regulating the income distribution of the top executives of the supervised enterprises and organises implementation of the policies.
Guides and pushes reform and restructuring of SOEs through the establishment of modern enterprise systems in SOEs.
Improves corporate governance by propelling the strategic adjustment of the layout and structure of the state economy.
Appoints and removes the top executives of the supervised enterprises, and evaluates their performances through legal procedures and either grants rewards or inflicts punishments based on their performances. Establishes corporate executives selection system in accordance with the requirements of the socialist market economy system and modern enterprise system, and improves incentives and restraints system for corporate management.
Similarly, Singapore’s Temasek’s decisions as a professionally managed investment house are guided by business tenets and commercial discipline, by four investment themes and the long- term trends they represent. These are:
Transforming economies Tapping the potential of transforming economies like China, India, South East Asia and Latin America, through investments in sectors such as financial services, infrastructure and logistics.
Growing middle income populations Leveraging growing consumer demands through investments in sectors such as telecommunications, media and technology, and consumer and real estate.
Deepening comparative advantages Seeking out economies, businesses and companies with distinctive intellectual property and other competitive advantages.
Emerging champions Investing in companies with a strong home base, as well as companies at inflection points, with the potential to be regional or global champions.
The South African government must disband the IMC on SOEs and establish a body with functions similar to those of the Chinese Sasac and Singapore’s Temasek to manage and control state interests in SOEs. This will also do away with the need for volunteers from the private sector.
Private sector volunteering may impact negatively on economic growth and sustainable development. Rather both government and the private sector must strive to co-ordinate our approach in this regard and encourage a stronger commitment to efficient SOEs with transformative leadership and astute management with best business acumen.