Two of South Africa’s most essential state-owned enterprises (SOEs) do not have permanent leadership, but there are ways.

Despite handing in his resignation in December last year, Eskom has still been unable to find a permanent replacement for Andre de Ruyter following issues between the board and Public Enterprises Minister Pravin Gordhan.

Gordhan rejected the board’s sole nomination for a new CEO, with the Minister claiming that three names had to be sent to him.

Several insiders at Eskom and in the political sphere told City Press that political interference was at play, as the board preferred Eskom manager Dan Marokane for CEO, whilst the political powers favoured Central Energy Fund board chair Ayanda Noah.

Gordhan has denied that political interference is involved, stating that he is simply following the law.

A new SOE CEO search will soon commence as Transnet CEO Portia Derby will leave the embattled rail operator at the end of October, with the chief executive of Transnet Pipelines taking over on an interim basis.

With this, two of South Africa’s most important companies, essential for the economy’s health, will be without a permanent leader as they face an upward battle to fix institutional failings.

Speaking to eNCA, OUTA’s CEO Wayne Duvenage said that the next CEOs at both companies have to be “change agents.”

These types of leaders build a strategy and a structure to fix the respective companies and need to be given free rein.

“Those are generally not political appointees. They cannot be civil servants. You and go and find the right people, and you allow them the freedom to what has to be done,” Duvenage said.

“Obviously, there have to be some boundaries, but those boundaries have to be minimal.”

He said that this is standard practice in companies that are floundering, as this type of leader is able to get the culture and leadership-based values correct.

Regarding de Ruyter and Derby, OUTA’s CEO said that both struggled to turn around the embattled utilities due to constant government intervention.

He added that ministers are playing political games by looking for a CEO they can manipulate, which will only result in the companies struggling further – hurting the country’s economy even more.

Despite the major challenges, both companies still have hope – but time is of the essence, he said.

Duvenage said that the government cannot procrastinate and must thoroughly engage with business and civil society to fix both enterprises.

If the companies, through this intervention, cannot be improved, he suggested that they should be privatised.

Although this could provide some issues as private companies can hold the country to ransom, it could ensure that infrastructure is correctly used.

“They are fixable… The longer you take, the more it’s going to cost, and we don’t have the money, so we are in dire straits with both of these organisations,” he said.

How to run a company

Professor Parmi Natesan, CEO of the Institute of Directors in South Africa (IoDSA), also said that government intervention in running SOEs should be limited.

“Governance best practice is for the board to appoint the CEO so that he or she is accountable to the board,” Natesan said.

“The challenge is that SOEs have enabling legislation or founding documents which often stipulate that the government (effectively the shareholder) has the power to appoint senior management, as well as the board.”

“King IV (a South African corporate governance code) recognises this and suggests in the SOE supplement that the board be fully involved in the appointment of the CEO and that both parties agree that the CEO is accountable to the board, not the Minister, as representative of the shareholder.”

She noted that a CEO without confidence can be appointed if this approach is not followed. This will see the CEO go over the board and report directly to the Minister.

This will result in blurred reporting, making it difficult for boards and management to work together.

source:How to solve South Africa’s huge SOE leadership problem – BusinessTech