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How Zondo intends to pry SOEs away from politicians

DM168

STATE CAPTURE COMMISSION REPORT, PART FIVE

How Zondo intends to pry SOEs away from politicians

Chief Justice Raymond Zondo delivers the fifth and final State Capture report at the Union Buildings on 22 June 2022 in Pretoria. (Photo: Gallo Images / Alet Pretorius)

At least R57.3bn in public funds were stolen during the State Capture era through sullied contracts awarded by SOEs. The State Capture inquiry is upping the ante on keeping politicians away from key SOE appointments and proposing bruising sanctions for wrongdoers.

If Chief Justice Raymond Zondo had his way, sweeping changes would be made to bulletproof the appointment of directors at state-owned enterprises (SOEs) against political interference and for heads at such entities to face immediate sanctions for abusing their powers.

In his final report of the State Capture inquiry, Zondo has made several proposals that are aimed at preventing the appointment of crony boards and top executives at SOEs, which paved the way for large-scale corruption to take place. And if appointed board members and executives abuse their powers, Zondo has proposed a mechanism for them to face imprisonment or a fine – or both.

Much of the looting and corruption happened at SOEs, with politicians weakening their governance structures by appointing compromised individuals who were linked to the Gupta family and former president Jacob Zuma. Zondo has estimated that at least R57.3-billion in public funds were stolen during the State Capture era through sullied contracts awarded by SOEs, mainly Eskom, Transnet and South African Airways (SAA). These funds benefited members of the Gupta family and their political and business associates.

It took a network of compromised individuals at Eskom, Transnet and SAA – including Brian Molefe, Anoj Singh, Siyabonga Gama, Matshela Koko, Dudu Myeni and others – to be appointed at SOEs and make State Capture possible. It equally took politicians such as former public enterprises ministers Malusi Gigaba and Lynne Brown to hand-pick these individuals at the behest of the Guptas and Zuma.

Fixing the ecosystem of appointments

Zondo has identified serious deficiencies in how board members and senior executives such as CEOs and CFOs are hired at SOEs, saying such appointments “can no longer be left solely in the hands of politicians”.

He writes in his report: “In the main, they [politicians] have failed dismally to give these SOE members of boards and CEOs and CFOs, who have integrity and who have what it would take, [opportunities] to lead these institutions successfully. They [SOEs] are all going down one by one and, quite often, they depend on bailouts.”

DM168’s calculations indicate that, between 2008 and 2020, Eskom received taxpayer-funded bailouts amounting to R188.7-billion, and SAA was awarded R32.3-billion over the same period. Other SOEs that were the sites of questionable appointments and State Capture, including Denel and SA Express, also received bailouts worth R2.8-billion and R2.1-billion respectively.

The SOE appointment model is broken and Zondo wants to remedy it in several ways. Zondo has proposed that an independent statutory body be established to assess prospective candidates at SOEs for suitable qualifications and integrity.

In doing so, Zondo recommends a Standing Appointment and Oversight Committee be established to ensure, through public hearings, that anyone nominated for a board position as CEO, CFO, or chief procurement officer of an SOE meets “the professional, reputational and eligibility requirements for such a position”.  

The committee would be staffed with a retired judge, a representative for the Minister of Finance, a senior legal practitioner appointed by the Legal Practice Council, a senior representative of the business community and the trade union community (both appointed by Nedlac), a registered auditor and a senior representative of an anticorruption nonprofit organisation.

The way it currently works is that ministers have the discretion to appoint board members and other executives without a transparent process.

Zondo’s proposal has the effect of making the appointment process at SOEs free from political manipulation by running an open process that ultimately makes recommendations to ministers about the best-identified candidates. If ministers reject the identified candidates, they will have the burden of providing reasons within 30 days. Arguably, Zondo’s proposal also seeks to break away from the ANC’s unbridled cadre deployment system, which often doesn’t promote a merit-based appointment process.

Bonang Mohale, the president of Business Unity South Africa and a businessman who once served as a director at SAA and SA Express, sees Zondo’s recommendation as positive.

“State Capture was about replacing the good people with the bad people at SOEs,” Mohale tells DM168. “The first part of moving forward is accepting that the ANC is an organised crime syndicate and it behaved like one. After accepting this, we need to declare its cadre deployment as illegal because it enabled State Capture and placed many comrades in the more than 700 SOEs.” The true test for accountability in the SOE universe will be for former executives and board members implicated in State Capture to be successfully prosecuted, says Mohale.

Criminalising abuse of power?

Zondo is also pushing for reforms that make it easier for directors and board members implicated in wrongdoing to be criminally prosecuted or slapped with monetary fines. He has proposed that the government should consider creating laws that make “abuse of power” a criminal offence for anyone serving at state organs/institutions. The yet-to-be-enacted criminal offence could carry a fine/penalty of up to R200-million, 20 years in prison – or both.  

Zondo says “abuse of power” sanctions can apply to any official who intentionally uses their power “otherwise than in good faith for a proper purpose”. This would apply to the “president of the republic who hands a large portion of the national wealth, or access to that wealth, to an unauthorised recipient, [as well as] to the junior official who suspends a colleague out of motives of envy or revenge”.

Although Zondo’s reform proposals have been widely praised, SOE industry players argue that they require unequivocal political will to be implemented. As a current board member of an SOE tells DM168: “The Parliament that slept at the wheel during the State Capture years is the same [one] that has to make legislative changes. Without political will, the Zondo reports will gather dust.” DM168

This story first appeared in our weekly Daily Maverick 168 newspaper, which is available countrywide for R25.

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  • Do you think that the ANC will relinquish one of it’s main sources of funding? What does it take to realise that the ANC is running a protection racket ? Why , if the ANC , holds to the “principle” of collective responsibility , has it NOT been charged with treason?

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