Public sector governance: From Armscor to Transnet Premier Corporate Governance Conference Stephen Sadie

Premier Corporate Governance Conference
Public sector governance:
From Armscor to Transnet
Stephen Sadie
(MBA, M. Ed)
CEO
Outline
1.
Armscor
2.
Blue IQ
3.
Eskom
8.
Transnet
4.
PetroSA
7.
Telkom
6.
SABC
5.
SAA
Types of State-owned Enterprises
• Schedule 1: Constitutional Institutions - Public
Protector, HRC, IEC
• Schedule 2: Major Public Entities - Eskom, SABC,
Telkom, Transnet, DBSA, CEF, ACSA
• Schedule 3: Other Public Entities
• National – Accounting Stds Board, ARC,
Competition Board, CCMA (PFMA 1999)
Provincial Public Entities X9
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Gauteng Economic Development Agency
Gauteng Gambling Board
Gauteng Tourism Authority
Gauteng Consumer Affairs Court
Gauteng Development Tribunal
Gauteng Education & Training Board
Gauteng Municipal Demarcation Board
Gauteng Provincial Housing Board
Gauteng Services Appeal Board (PFMA 1999)
Legislation
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Public Finance Management Act
Municipal Finance Management Act
Companies Act
Protocol on Corporate Governance in the Public Sector
King 3
President’s Review of SOEs
Legislation
• Government is the shareholder and its powers are
exercised through the responsible minister
• In PFMA, accounting authority = board, executive
authority = minister
• Although Dept of Public Enterprises is only
responsible for 6 entities, it formulates policy and
guidelines for all SOEs.
1. ARMSCOR
Armscor Directors (Dept of Defence)
CEO fired
• CEO Sipho Thomo & 2 senior officials suspended in 2005
after recommendations by First Consulting
• They were found not guilty and reinstated
• CEO asked by board to resign in Nov 2009
• Suspended in Nov 2009
• Airbus A400 risen to R47bn from R17bn
• Late for portfolio committee, fell asleep at table
• Chairman Popo Molefe “you are pulling us all down with
you”
• Fired on 7 January 2010 (M&G online 20/01/10)
2. BLUE IQ
Blue IQ Investment Holdings Directors (Dept
of Economic Development, Gauteng)
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Mr Phakathi – Chairman
Mogopodi Mokoena – Deputy Chairman
Amanda Nair – Executive Director
Joe Tsotetsi - Non Executive Director
Johnny Sexwale - Non Executive Director
Younaid Waja - Non Executive Director
Doris Dondur - Non Executive Director
Abel Mawela - Non Executive Director
S'celo Mahlalela
Remuneration
• Firoz Cachalia, MEC for Economic Development, cuts fees
• R4m paid in 2009/10
• Chairman from R25 000 to R10 000 per scheduled meeting
(10pa)
• Board members from R20 000 to R7 500 (BD 24/08/10)
• Eskom R477 000 pa
• Private sector average R362 000 pa
• 2 employed by other govt entities - to be recovered (BD
26/05/10)
3. ESKOM
Eskom Directors (Dept of Public Enterprises)
PM Makwana
Chairman
BA Dames
Chief Executive
LCZ Cele
NED
SD Dube
NED
LG Josefsson
NED
H Beom Lee
NED
WE Lucas-Bull
NED
B Mehlomakulu
NED
JRD Modise
NED
P O’Flaherty
Financial
Director
U Zikalala
NED
BL Fanaroff
NED
J Mirenge
NED
Chairman resigns, CEO fired
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Eskom Conversion Act 2002
Tussle between CEO and chairman
Maroga resigns, Godsell resigns
President intervenes
Maroga fired
“CEO didn’t complete 41 tasks”
“Chairman is racist” BMF vs COSATU
“Who is in charge?”
“Do we need boards?” Vytjie Mentor
Maroga wants R85 million
Underlying problems
• PFMA – the government can directly appoint both board
and CEO
• Abolish boards or give up appointing CEOs
• Government wields power without responsibility.
• Board has responsibility without power
• Key issue is relationship between government and
parastatal
4. PETROSA
PetroSA Directors (Dept of Minerals & Energy)
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Adv L. Makatini – Acting Chairperson
Mr M. Damane – CEO of CEF
Dr Z. Rustomjee – Board of CEF
Mr D.R. Zihlangu – Former CEO of Alexkor and Impala Plat
Mr M.Y. Kajee – CEO Sekunjalo Investments
Ms N. Medupe – Founding Director of Indyebo Consulting
Mr Y. Tenza – Former COO of Foskor
Mr Z. Mavuso – Chief Director, Dept of Energy
Mr N.G. Nika – Chief Financial Officer
Ms P.S.V. Ngaba – Company Secretary
CEO fired
• Sipho Mkhize, CEO, fired in Sept 10
• No reasons given by chairman, Popo Molefe (BD
24/08/10)
• Tender irregularities
• Based on Gobodo auditors report (FM 3/09/10)
• CEO to challenge dismissal (BD 30/08/10)
5. SAA
SAA Directors (Dept of Public Enterprises)
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Cheryl Carolus – Chairperson
Sizakela Mzimela - CEO
Cyril Jantjies - HR professional
Russell Loubser – CEO, JSE
Duduzile Miyeni – CEO, Skills Dynamics
Bonang Mohale – Chairman of Shell SA
Lindi Nkosi-Thomas – Advocate of High Court
Margie Whitehouse – Marketing professional
Exceeded authorisation
• Former CEO Khaya Ngqula left under a cloud (family
tenders)
• New Chairwoman, Cheryl Carolus, taking action
• Audit by KPMG
• 1st summons R27m for retention bonuses
• 2nd summons for R24.8m for sponsorships
• Angel Cabrera, Argentinian golfer & other sponsorships
• SAA wants R52m back
Reviewing processes to appoint board
members
• Acting director general, Andrew Shaw of DPE, told Scopa
in Sept 10:
• Relevant skill sets
• Assessing potential conflicts of interest
• Sufficient time to dedicate to company
• Excluded previous SAA board members from all boards
under DPE
• Could charge other employees as well. (M&G 3/09/10)
6. SABC
SABC Directors (Dept of Communications)
The best soapie in town
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SABC Ltd in 2004
Dali Mpofu, CEO, caught up in Mbeki/Zuma conflict
Gab Mampone, acting CEO, March 09
SOS – Save our SABC May 09
Prevent political interference in board – Prof Harber (BD
27/05/09)
• Outgoing chairwoman, Irene Charnley appoints Solly
Mokoetle as CEO
• Zuma appoints new board Jan 10
• Ngubane unpopular with board over unilateral decision to
appoint Phil Molefe, head of news May 10
Chairman/CEO vs Board
• Mokoetle complains to Ngubane of pressure from board.
524 emails from board Jan – July 2010
• Board is beginning to manage SABC (M&G 20/08/10)
• Board launches disciplinary action against Mokoetle.
Provide reasons why he should not be suspended (M&G
27/08/10)
• Robin Nicholson, CFO appointed acting CEO
• MK Military Veterans Assoc backing Mokoetle vs COSATU
& SACP (The Times 1/09/10)
Board and management
• Once the board has established the values,
vision and purpose of the business, it must
determine the strategic direction.
Management can develop various strategies
which are approved by the board and then
management implements them.
(Khoza, RJ and Adam, M. The Power of Governance, 2007)
7. TELKOM
Telkom – Board of Directors
Jeff
Molobela
Chairman
Jeffrey
Hedberg
Acting
Group CEO
Brahm du
Plessis
Independent
Sibusiso
Luthuli
Independent
Deon
Fredericks
Acting Chief
Financial
Officer
Julia
Ntombikayise
Hope
Government
Representative
Younaid Waja
NonExecutive
Director PIC
Peter
Joubert
Independent
Dr Victor
Lawrence
Government
Representative
Reitumetse
Jackie Huntley
Government
Representative
Chairman interference
• Telkom SA Ltd - Listed on JSE & NYSE 2003
• Acquired Multilinks in Nigeria May 07 – financial disaster
• Govt 39.8% largest shareholder – can appoint 5/12
directors
• PIC 15% (www.telkom.co.za)
• Tension between profit and installing unprofitable landlines
in remote areas
Chairman interference
• CEO Reuben September complains of interference
by chairman Jeff Molobela (BD 22/06/10).
• CEO and CFO Peter Nelson resign (BD 14/07/10)
• Jeffery Hedberg appointed as acting CEO from
Cell C (FM 16/07/10)
8. TRANSNET
Transnet Directors (Dept of Public Enterprises)
Prof G.K.
Everingham
Acting Chairman
CF Wells
Acting Group
Chief Executive
M.J. Hankinson
NED
Dr ND Haste OBE
NED
MP Moyo
NED
NR Ntshingila
NED
A Singh
Acting Chief
Financial Officer
PG Joubert
NED
KC Ramon
NED
N.B.P. Gcaba
NED
NNA Matyumza
NED
Succession
• Transnet Ltd a public company in 2000
• Maria Ramos resigns as CEO to go to ABSA Feb 09
• Siyabonga Gama, CEO Transnet Freight Rail is a
candidate supported by Cabinet ministers (Minister of
Justice - Radebe & Minister of Communications - Nyanda)
• Disciplinary process against Gama and dismissal for
exceeding limit of R10m (BD 15/06/10)
• Quiet diplomacy of minister criticised. Prefers to let boards
run SOEs. (M&G 18/06/10)
Shortage of skilled corporate governance
professionals
• Company secretaries: King III – “competent, suitably
qualified”
• Companies Act – “knowledgeable and experienced in the
law”
• CIS qualification recognised in 70 countries
• 101 years old in Southern Africa