South Africa’s SOE management breakdown

The management of South Africa’s state-owned enterprises (SOEs), particularly Eskom and Transnet, has broken down, with numerous executives and board members resigning over the past few weeks. 

This is feedback from the former chairperson of the Development Bank of South Africa, Professor Mark Swilling, who spoke to the SABC about the swathe of resignations at the country’s SOEs. 

Last week, former Transnet chairman Popo Molefe resigned from the utility’s board following the resignation of CEO Portia Derby, the utility’s CFO, and Transnet Freight Rail CEO Siza Mzimela. 

A week before that, Mpho Makwana decided to step down as Eskom’s board chairperson and non-executive director.

He will be replaced by Mteto Nyati. The department first said Nyati would be the interim chairperson, but it quickly corrected it to say he was the new chairperson.

This has left South Africa’s most important SOEs without permanent CEOs, grappling with leadership instability and the loss of experienced board members. 

“What we are seeing at Transnet and Eskom is a breakdown in governance and leadership,” Swilling said. 

“It is extremely concerning, and all South Africans are affected on a daily basis by what is happening at Transnet and Eskom. When we are facing our greatest crises at SOEs, key leadership figures are resigning.”

Swilling singled out Transnet as a major concern as it faces a severe crisis with declining capacity, deferred maintenance, theft, and mismanagement with no signs of a turnaround. 

“Improvement in Transnet’s performance cannot be achieved until it is broken up into more manageable proportions with their own separate boards.”

“There is widespread agreement that the current governance model is structurally flawed. It is completely and utterly unviable to have such important SOEs vulnerable to political interference. That is completely unacceptable,” Swilling said. 

Swilling’s comments echo Wits Professor Alex van den Heever, who called the country’s current shareholder representative model a “case study in failure and what not to do”.

Van den Heever said the country has to look at the structural reasons for this occurring at Eskom and other SOEs such as Transnet, Prasa, and the Post Office. 

These institutions involve a substantial amount of procurement and critical decisions that involve vested interests. This naturally creates patronage, the professor said. 

“Our current government shareholder model for SOEs is deeply flawed and designed to fail because it allows for an easy entry route into these patronage and procurement opportunities,” Van den Heever said. 

“One person, the government’s shareholder representative, can influence the design of the board and the appointment of CEOs and other management executives. So now they are placed right at the centre of the leadership functions of the organisations.” 

“When you see these high turnover rates and instability in leadership, you are seeing the pattern develop. Behind the scenes, someone is trying to get into that organisation through leadership appointments.”. 

Van den Heever called for a clear separation between the leadership of SOEs and the government through a complete overhaul of the current governance structure. 

“This model that we have had in South Africa is a case study of failure and what not to do. We really have to redesign our structural arrangements around the governance of these organisations,” he said.