PRETORIA, April 10 – Public Enterprises Minister Pravin Gordhan on Monday said the new board put in charge of struggling State-owned company (SOC) Denel has been mandated to restore sound corporate governance, review the effectiveness of the management team, among other priorities as government moved in to turn around the fortunes of the entity.
“The immediate priorities for the new interim board will be to restore sound corporate governance; to review the effectiveness of the management team; to review major contracts; to review the company’s financial position with the view to creating sustainability; and to consult all stakeholders,” Gordhan said in Pretoria.
“One of the most important relationships for Denel is with the Department of Defence (DOD). We will take further steps to understand the DOD’s needs and be responsive to them. In the coming weeks I will be reviewing the composition of boards at other SOC’s under the authority of the department of public enterprises, as well as the executive management teams to ensure that SOC’s are set on a new path.”
He emphasised that the South African government, now led by President Cyril Ramaphosa could “no longer afford to delay these decisions”.
“In the 2018 State of the Nation Address (Sona), President Cyril Ramaphosa called for immediate action in a number of State-owned companies that are experiencing “severe” governance and financial problems. The President made the commitment that ‘we will intervene decisively to stabilize and revitalise state owned enterprises. The recent action we have taken at Eskom to strengthen governance, root out corruption and restore its financial position is just the beginning…” said Gordhan.
He said Ramaphosa also expected the removal of board members from any role in procurement, and the SOCs to work closely with the Auditor-General, in a bid to strengthen external audit processes.
“A number of SOCss have large government guarantees and their long-term viability is a concern. Capital markets have reduced lending to some because of serious governance concerns and the lack of credible reforms to boards and executive management,” said Gordhan.
“The challenge in South Africa is that the State as shareholder in SOCs, has never fully applied the levers at its disposal in terms of the Companies Act, to hold directors of SOC boards fully liable for their actions.”