Home South African Government forges ahead with new SOE entity in bid to stop rot

Government forges ahead with new SOE entity in bid to stop rot

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The government has decided to forge ahead with its plans to create a new centralised entity that will manage its shareholding in state-owned enterprises (SOEs) in a bid to stop the rot.

The government has decided to forge ahead with its plans to create a new centralised entity that will manage its shareholding in state-owned enterprises (SOEs) in a bid to stop the rot. Photo: File

THE GOVERNMENT has decided to forge ahead with its plans to create a new centralised entity that will manage its shareholding in state-owned enterprises (SOEs) in a bid to stop the rot.

The Department of Public Enterprises (DPE) yesterday told Parliament that it would be presenting a Draft SOE Shareholder Management Bill by the end of the 2021/22 financial year.

The centralised shareholder management model from the bill – meant to address the lack of overarching SOE legislation – was first mooted in September. It aims to ensure a standardised governance, financial management and operational performance framework for all SOEs to curb runaway fruitless and irregular expenditure.

Currently SOEs fall under various government departments, and this has led to devastating consequences such as fragmentation, duplication, overlapping of functions and lack of accountability. Large SOEs such as the SAA, Denel, Transnet and Eskom are overseen by the DPE while others fall within Transport, Mineral Resources and Energy, and other departments.

DPE director-general Kgathatso Tlhakudi told a parliamentary committee that the bill sought to promulgate legislation to govern SOEs as they were currently governed through the Companies Act as well as the Public Finance Management Act.

“It will ensure that we have appropriate institutional arrangements on overseeing SOEs and that we have appropriate categorisation of SOEs,” Tlhakudi said.

“The wholly-owned commercial entities and the partially-owned SOEs is what we are now dealing with. For instance, with SAA, which is now in the same category as Telkom, how do you manage that shareholding in terms of still making sure that the priorities and objectives of the government are still attained?”

Tlhakudi said they had studied various global models of government ownership from other countries to ensure that the new entity takes into consideration strategic national development and commercial objectives.

He said DPE would also integrate lessons from the Zondo Commission, Mpati Commission and other public inquiries to ensure the appointment of competent people of integrity in a transparent and robust process to SOE boards and executive positions.

“We also have to decide how we manage entities and agencies which are not profit-making because sometimes you have extensive boards which

are expensive to look after those entities, so we have to decide whether to restructure accounting authorities in that instance,” he said.

“The oversight function will be arranged into a centralised oversight model with a single institution responsible for exercising the oversight function across the ’Strategic SOCs’ and taking full responsibility for the performance of State investments.”

This comes as the auditor-general yesterday said the DPE had incurred irregular expenditure of almost R25.9 billion for the year ending March 31, 2021, with Transnet accounting for R14.1bn and Eskom R11.6bn.

Eskom also recorded R1.3bn in fruitless and wasteful expenditure in overpayments for fuel oil contracts.

Total irregular expenditure for 2020/21 at the South African Forestry Company increased by R100 million to R733m, mainly due to contracts and quotations that were awarded without following prescribed supply-chain management policies and Treasury Regulations.

At Denel, irregular expenditure incurred in the 2020 financial year increased from R2.9bn to R3.1bn mainly due to irregularities identified by the auditor-general.

The audit for the 2020/21 financial year for the state-owned arms manufacturer is still in progress by the auditor-general.

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