13 Apr 2022

A ministerial sub-committee on the performance of State Owned Enterprises (SOEs) has been established to review their landscape.

Responding to a parliamentary question recently, Minister for Presidential Affairs, Governance and Public Administration, Mr Kabo Morwaeng said the sub-committee, chaired by Minister of Finance and Economic Development, had been formed with a view to strengthen accountability, create efficiencies and achieve service excellence.

Mr Morwaeng said terms of reference for the sub-committee covered seven broad areas, which included corporate governance, performance monitoring, funding, rationalisation, establishment (policy and guidelines) and oversight.

He also indicated that there was no one-size-fits all approach for determining the size of SOE boards, which was determined by the level of diversity commensurate with the sophistication and scale of the organisation.

He said the number of board committees that the entity needed to establish was another determinant as such board sizes may range from six to 12.

“While establishing Acts and Constitutions of SOE did not impose any limits on board memberships, the guidelines for shareholder oversight over parastatals adopted in November 2012 recommended that an individual may not serve on more than two boards,” he said.

He explained that the reason for limiting multiple memberships was to ensuring that members were able to pay proper attention to the affairs of the institutions on whose boards they served and to minimise conflicts of interest.

The SOEs, he said were required to sign a shareholder compact with parent ministries which was a performance agreement between the ministry and the SOE represented by its board chairperson.

“The compact aligns performance expectations of the SOEs which can be effectively monitored including the strategic intent of the shareholder to the SOE and the SOE strategic objectives, performance indicators and targets as presented in the strategic plan as well as undertakings by the ministry and undertakings by the board,” he added.

He further indicated that as far as liability of individual board members was concerned, the founding statuses or the SOEs and constituencies held board members liable to the extent that it was provided for.

“It should be noted that board decisions are made by a collective, therefore individual board members cannot be held personally liable for decisions made by the collective,” he said.

Meanwhile, he said the ministry was currently at final stages of developing an SOE code of corporate governance and its implementation framework which aimed at enhancing corporate governance and in turn improve performance of SOEs.

In order to enhance oversight over SOEs by ministries, he said the ministry was in the process of developing an SOE Ownership Policy to provide mechanisms for enhancing accountability in the management of SOEs.

That, he said would be achieved through incorporation of specific provisions dealing with matters that relate to maintaining strong interest in the financial performance of the commercial SOEs as well as remedial actions which may be pursued where the SOEs’ strategic direction, governance or performance deviated from those agreed at establishment.

Mr Morwaeng was answering a question asked by Kanye North MP, Mr Thapelo Letsholo, who had asked the minister to state when a full review of SOEs would be implemented, particularly why board members, in general could not be reduced to five and why people could not be limited to not more than two board memberships. Mr Letsholo also wanted to know the value and benefit that would accrue to the organisations if terms of board memberships were limited to two terms.

The MP also asked the minister to articulate how board effectiveness was assessed on an annual basis and how the ministry worked to increase accountability for board members.

He further wanted to know the ministry’s pursuit for civil liability in terms of gross liability by board members. ENDS