Opinionista Johann Redelinghuys 22 January 2020

As long as SOE board chairs are political appointees, they will battle to survive

It's time for the government to completely remove any suggestion of political patronage when it comes to the appointment of chairpersons and leaders of SOEs.

In a recent edition of, “From the desk of the President”, dated 20 January 2020, President Cyril Ramaphosa vows to end the “practice of poorly qualified individuals being parachuted into positions of authority through political patronage, which is why a major focus of our work this year is to restore the SOEs [state-owned enterprises] to health. We will do this by appointing experienced and qualified boards and managers.”

These are encouraging words, indeed.

The president puts his finger on the most critical aspect of why the SOEs are battling and then why they fail to deliver on their mandates.

There is much finger-pointing to “poor leadership”, to the lack of skill in executive management. And mostly it is justified. But the blame should lie very much at the feet of the board and then most notably in the place where the buck finally stops – the chairperson.

The chairperson is the cog around which all leadership in the business revolves.

So, if the SOEs are not performing and are in drastic need of the president’s intended medicine, why are we still being sucked into the practice of government appointing the chairperson and usually members of the board as well? It also meddles regularly and can create no end of confusion (see the comments later regarding SAA). The government as the most crucial shareholder must have some say, as is the case of any shareholder of any board. Still, there has to be a sharply defined independence that stamps its authority on this decision-making process.

The issue of independence has been defined and discussed at length in every corporate governance initiative. All agree that for the board to be effective, the chairperson must be independent. If this is not possible for whatever reason, then a wholly independent non-executive director who will satisfy the independence criterion must be appointed.

Ensuring this level of independent thinking and at the same time respecting proper standards of governance should avoid messy outcomes like that of the recent moves at the SAA board. 

This was reported in the media recently: “Public Enterprises Minister Pravin Gordhan has appointed embattled South African Airways acting board chairperson Thandeka Mgoduso as executive chairperson, in a move the ministry claims is to shore up capacity at the crisis-stricken airline.

“This means Mgoduso, who also chairs the SAA board’s remuneration sub-committee, becomes an executive director and will become more involved in SAA’s operations”

It is so strange, it’s almost laughable, and way out of line for a smart operator like Gordhan. What was happening? For the supposedly independent chairperson of a basket case like SAA to be reassigned to an executive role while retaining the incumbent CEO position sounds like a recipe for calamitous failure and portends no end of role clashes.

There is an aside and a further surprising move by Gordhan. Jabu Mabuza resigned the chairpersonship of Eskom because a promise he made to the president could not be kept. He promised that Eskom would avoid load shedding during the festive period. Gordhan accepted the resignation. Mabuza is one of the few competent chairs in this neck of the woods, and Gordhan should have refused to accept the resignation, no matter how honourable and gentlemanly Mabuza was for falling on his sword.

It is said that before previously taking on the chairpersonship of Telkom, Mabuza only allowed himself to be appointed on condition that there was never any interference from government. He then led the board and provided the leadership that turned the business around. Real independence won the day. And proof, if any was needed, that impartial decision-making can best be achieved in a robust climate of independence.

What can we do to ensure a higher standard of independence and better overall governance? If we are not going to continue scraping the bottom of the barrel, as the president intimated, and if we’re not going to appoint “poorly qualified people” because of “political patronage”, where will the better candidates be found? 

It should be suggested that there is a substantial cohort of experienced business leaders and experienced past chairpersons that don’t fall into the “political patronage” category that could be nominated. 

Importantly, this process needs to be driven at the outset by an independent advisory body – perhaps one of the top law firms, or a small group of well-regarded, retired senior businesspeople. Maybe consider a committee of senior partners in one of the international audit practices. DM

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