Defend Truth


We need a new era of corporate accountability


Mike Davies is a director of Kigoda Consulting, an independent consultancy that offers specialist political risk and responsible investment advisory services.

The Gauteng High Court’s lifelong delinquency order against former non-executive chair of South African Airways Dudu Myeni raises the stakes for South African directors and should incentivise them to take their corporate governance responsibilities more seriously than many have in recent years. But much more will be needed before we can hope to see a new era of corporate accountability.

The Organisation Undoing Tax Abuse (OUTA) and the SAA Pilots Association have spent more than three years pursuing the case against the former non-executive chair of South African Airways (SAA), Dudu Myeni through the courts, fighting three interlocutory challenges by Myeni to have it thrown out. Not many have the time and resources required to see that kind of battle through.

Meanwhile, in a blow for director accountability, two recent court rulings against Steinhoff and African Bank Investments’ shareholders held that shareholders themselves do not necessarily have the power to hold directors accountable for losses suffered as a result of corporate governance failures.

The courts found that it is the companies themselves which must hold directors liable for any breach of duty. However, companies are reluctant to pursue claims against former directors. In several of the most recent corporate scandals, companies have refused even to disclose reports on investigations into director misconduct, citing legal privilege.

It is therefore critical for shareholders to use their powers to vote against the election of directors who have previously failed to uphold standards of good corporate governance.

Companies must also conduct far more robust due diligence on potential board and executive appointees. There are far too many examples of directors who have clearly failed to uphold their fiduciary duties in one position, simply moving on to other similar roles.

The cases of African Bank and Transnet are illustrative of this broad failure of accountability.

African Bank

The 2016 Myburgh Report on African Bank Limited, which was placed under curatorship in August 2014, found that the bank’s directors had breached their fiduciary duties, and that its boards were party to the bank acting negligently and recklessly.

Myburgh’s investigation considered, inter alia, the conflict of interest created by African Bank providing financial assistance to furniture retailer Ellerines. African Bank was a wholly-owned subsidiary of African Bank Investments Limited (ABIL), which also owned Ellerines. The boards of ABIL and African Bank were identical and held board meetings for both entities simultaneously. Myburgh noted that an independent bank board would have asked simple questions about why aggregate unsecured loans of R1.4-billion were being made to a struggling furniture retailer.

Despite the Commission’s findings, directors who served on the ABIL board from 2012 to 2014, when key breaches took place, serve on the boards of other JSE-listed companies, including PPC, Mpact, Kumba and Redefine Properties.


Transnet’s procurement of locomotives from China South Rail (CSR) has been embroiled in allegations of corruption relating to the Gupta family. Investigative journalists amaBhungane have reported on kickback agreements totalling R9-billion, with the Guptas usually receiving a 21% cut of whatever Transnet paid.

In 2018, the Treasury commissioned a forensic investigation into the details of the allegations about how Transnet officials compromised the locomotive tender procurement processes to benefit CSR. While the findings against individuals such as former CEO Brian Molefe and former CFO Anoj Singh are now common knowledge, the serious findings against the board are not.

For example: The Treasury report finds that the Transnet board approved the business case for the acquisition of 1,064 locomotives, worth tens of billions of rands, nine months after the tender process had started. The initial estimated total cost (ETC) of the procurement was R38.1-billion. Two years later, Transnet executives told the board’s acquisitions and disposals committee that the initial ETC had excluded forex hedging, forex escalation and other price escalations, even though these had in fact been included. Following this misrepresentation, the board increased the ETC to R54.5-billion.

The forensic report found that:

  • Board members failed to act in the best interests of Transnet when they ratified the increase of the ETC to R54.5-billion.
  • The board contravened the Public Finance Management Act by failing to ensure that the procurement system was “fair, equitable, transparent, competitive and cost effective”.
  • Board members should be investigated for “possible dereliction of their duties in terms of section 76(3) of the Companies Act and section 86 of the PFMA”.

An earlier report by law firm Werksmans made similar findings, including that “the board of directors failed to exercise objective judgment”, that “it would appear that the [board] was supine in its deliberations at best” and “there was a lack of appreciation of and application of mind (at the very least), by the executives and the Board to the actual 1064 Business Plan and to the interest of Transnet”.

Despite these findings, one member of the board that approved the increase of the ETC to R54.5-billion continues to serve on the boards of JSE-listed and state-owned companies, while another was subsequently appointed as a Transnet executive, although he has since resigned.

Several of these former Transnet board members serve in other leadership positions. One, who ironically was appointed to President Cyril Ramaphosa’s State-Owned Enterprises Council in June 2020, is the head of South African investments for a major asset manager.

Way forward

Declaring directors to be delinquent sends an important message, but it is unlikely to result in a significant shift in corporate accountability. The sheer number of governance failings being brought to light at the Commission of Inquiry into Allegations of State Capture alone means that the delinquency process is unfeasible for most.

It can be difficult to balance the often-conflicting reports that follow a corporate governance failure, but, as the Myeni judgment notes, while the board of directors has collective responsibility for a company, collective responsibility does not exclude individual responsibility.

Directors are required to act in good faith, in the best interests of a company, and with care, skill and diligence. If we are to see a new era of corporate accountability, regulators and shareholders should be doing much more to ensure that those who have failed to uphold their fiduciary responsibilities are prevented from moving on to other positions of trust and responsibility. DM/BM


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