Ordinary citizens, consumers and civil society must play more active roles as shareholders of state-owned enterprises than is currently the case, as activist shareholders in private companies do, to hold these entities accountable. 

Given that SOEs are taxpayer funded companies, citizens should be seen as shareholders of these companies. When ordinary citizens, civil society and consumers hold SOEs accountable as shareholders, they are exercising active citizenship. 

South Africa does not have an extensive culture of citizen shareholder, civil society and consumer activism holding SOEs accountable. Civil society organisations, the Organisation Undoing Tax Abuse and SA Airways Pilots Association, showed the way in citizen shareholder activism when they lodged an application to the High Court in March 2017 to have former SAA chairperson Dudu Myeni declared a delinquent director for her appallingly destructive mismanagement of the state airline. 

South Africa’s failing SOEs are unlikely to become efficient, productive and have any developmental impact, unless they are held as accountable to the public as listed companies are to their shareholders. 

Civil society organisations should insist that state-owned companies have annual general meetings (AGMs). Many South African SOEs do not hold AGMs. 

It must become mandatory for SOEs to open their AGMs to ordinary citizens, consumers and civil society. Consumers, stakeholders and activists could challenge company strategy, ask questions about activities, and hold boards and management accountable at the AGMs. 

SOE AGMs are generally secretive affairs, information about them not widely publicised and not open to the public. This lack of transparency undermines good corporate governance, and makes it difficult for citizens, civil society organisations and stakeholders to access information about these entities, to hold them accountable.

Even when AGMs are organised the information from SOEs is usually poor. 

As “shareholders”, by virtue of paying taxes, civil society organisations, consumers and ordinary citizens must become “activist” and attend SOE AGMs, and pressure the management of these organisations to govern ethically. 

Citizens, consumers, and civil society organisations should be given voting rights at SOE shareholder meetings. 

Citizen shareholder activists should take on SOE executives and boards at annual general meetings and hold them accountable for the entities’ performance, board and management remuneration and strategy. 

SOE executives and boards receive huge remuneration packages and annual bonuses, yet these entities are loss-making, fail to deliver services and are frequently bailed out with public funds. The excessive remuneration of executives and board members of failing state-owned entities has not only given the managers in these organisations no incentives to become efficient, honest, and accountable, but has added to the ballooning public debt burden. 

As a case in point, in the 2010 financial year, Eskom executive directors received a 25% increase in remuneration, to merely maintain adequate coal stockpiles and uninterrupted electricity supply. 

In 2016, executives of state oil company PetroSA received R17.3-million in bonuses, despite the organisation making a R14-billion loss that year. The former CEO of the Road Accident Fund (RAF) was paid nearly R4-million in the 2017/2018 financial year for working for three months of that year. He received a R2-million performance bonus. In that year, the RAF’s bank account had been attached by the Sheriff of the Court over R8-billion in unpaid debts. 

Civil society organisations should insist that remuneration and incentives for both boards and executives of SOEs be made public. At SOE annual general meetings, citizens, civil society and the media must object to extravagant remuneration packages for executives and board members of failing companies. 

SOE boards

Incompetent boards and executives are among the major reasons for SOEs’ failures. Appointment to boards and management is heavily politicised. The ANC’s deployment committees directly propose boards and CEOs for SOEs. 

Most SOE boards lack industry-appropriate skills, professionals, and demographic diversity. Politically exposed individuals are recycled from board to board, bringing failure to every board they are appointed to. 

Appointments to SOEs’ boards and management are often opaque, shrouded in secrecy and frequently appear not rational. Civil society organisations and citizens should campaign for the depoliticisation of boards and management appointments.

Civil society organisations should campaign for transparency and public and media access to information about SOE board and management appointments. Civil society and citizens should monitor whether there are conflicts of interests among SOE board and management members. 

With exceptions, there are few legal requirements for public participation in appointments to management and boards of SOEs. Civil society organisations should insist on public participation on SOE board appointments. In fact, civil society should push for legislation to make public participation in board appointments compulsory. 

There also must be regular assessment of the performance of SOE board members – and these must be made publicly available. Civil society organisations should insist on regular lifestyle audits for SOE board members.

Civil society should actively nominate credible candidates for appointments to SOE boards and management. Citizens and civil society organisations should insist that longlists of SOE board nominations should be made publicly available; and that those who were rejected should be compared to those who have been appointed to board positions. 

Civil society and individual citizens should contest irregular board and executive appointments. Failing this, citizen shareholder activists should go to courts to challenge such poor SOE board appointments. They must also target failing, but politically connected board members for dismissal, and, have incompetent, corrupt and neglectful board members and executives declared delinquent. 

Most of the irregular spending, wasteful spending and corruption takes place in the procurement system of SOEs. There must be greater public participation in the awarding of tenders by SOEs. Citizens, civil society and the media should sit in tender award deliberations. 

Citizens, civil society and the media must work to get corrupt companies blacklisted from tendering for government services. There have been several successful court applications, of failing bidders challenging corrupt SOE tenders and having these awards set aside. Citizen, civil society and users or consumers should also take SOEs to court when they see that incompetent companies have been fraudulently awarded tenders to provide services and products. 

Citizens, consumers, and civil society organisations must also protest more about shabby services, products, and treatment by SOEs. Citizens who consume products and use the services of SOEs must form consumer groups to serve as pressure groups to get these entities to be more accountable. 

There is a strong case to be made for SOEs delivering public services to have user forums, including customers, watchdogs and community groups, to monitor the quality of services of these entities, whether they fulfil their social obligations and to hold them accountable. 

It should be compulsory for all SOEs to introduce citizen and consumer satisfaction surveys, and the results of these to be made public. SOE employee performance should be measured partially based on the results of these citizen and consumer satisfaction surveys. 

Dire financial management

Financial management of assets, resources and budgets in most SOEs are shockingly dire.

Last year, the Auditor-General said the financial records of SOEs are often so poor that in the last financial year, the financial records of 17 out of the 55 entities audited by the Auditor-General were so dismal that they were not reliable for financial analysis. This included the Passenger Rail Agency of South Africa, responsible for passenger rail services..  

Eskom has R450-billion debt. In the 2019/2020 financial year, PetroSA posted a deficit of R5.57-billion, the SABC of R511-million, and the Central Energy Fund of R334-million. 

In the same financial year, at least 21 SOE entities, out of 55 large ones, officially declared to the Auditor-General that they would not be able to continue as going concerns unless they were bailed out. These included Eskom, PetroSA and the SABC.

Many SOEs repeatedly fail to complete their annual financial statements. 

In the Auditor-General’s 2018/2019 consolidated national and provincial audit, SAA, the South African Energy Corporation (for a second year in a row) and the Trans-Caledon Tunnel Authority failed to submit their financials. Citizen shareholders must push to have executives and boards fired for not returning their companies’ annual financial statements. 

Astonishingly, many failing SOEs that have been seeking public bailouts have had no turnaround plans. Others, who have been bailed out on the basis that they would implement turnaround plans, either did not have such plans, or if they did, they were not implemented. 

Citizens, civil society, and the media must monitor whether failing SOEs have turnaround plans, which should at the minimum include recruiting the best talent in the country, on merit, changing their business model, getting rid of non-core assets and non-performing staff, tackling procurement corruption, and seeking strategic equity partners where possible. 

Citizen, civil society, community, and customer oversight has been the missing element in holding SOEs accountable. Without pressure from civil society, communities and customers, it is very unlikely that South Africa’s SOEs will become efficient, less corrupt, and more responsive. DM/MC

William Gumede is Executive Chairperson of the Democracy Works Foundation. 

This is an extract of a paper “Civil Society, Citizens and Consumer Activism Crucial to Increase State-owned Company Performance”, presented at the recent United Nations Economic Commission for Africa High Level Policy Dialogue on State-owned Enterprises.