Nambata T. Angula
Former Minister of Public Enterprises Leon Jooste stated several times that some public enterprises are failing because they are led by board members with no integrity nor the requisite skills to provide the leadership needed to place these institutions on a growth path.
The former minister is also on record as encouraging competent professionals to apply for seats on public enterprises boards. He reasons that individuals with the right personality traits, quality of integrity, and skills will encourage such a culture to filter down into an institution, as a board with such qualities would not allow the institution to fail.
Namcode and PEGA
The Namcode, based on the King’s Reports, provides a Corporate Governance Code for Namibia and states that shareholders are responsible for the composition of the board, and it is in their interests to ensure a properly-constituted board in terms of skills and representation.
It further advises that the appointment process of boards should be formal and transparent.
The Namcode further states that the shareholder should ascertain whether potential candidates for board appointments are competent, and can contribute to business judgement calls to be made by the board.
In looking at the skills and suitability of potential directors, three dimensions require consideration: the knowledge and experience required to be on a board; the apparent integrity of the individual; and the skills and the capacity of the individual to discharge his/her duties to the board.
Directors of Boards in terms of common law have a fiduciary duty to act in the best interest of the company; and to act with due care, skill and diligence.
The Public Enterprises Governance Act, 1 of 2019 (PEGA) provides for procedures for the appointment of boards of non-commercial and commercial public enterprises and extra-budgetary funds.
In summary, the Ministry of Public Enterprises (MPE), after consultation with the relevant ministry, embarks on the recruitment (advertising, shortlisting and interviewing candidates) of board members for public enterprises.
The interview panel consists of independent individuals with strong leadership skills, and experts in the relevant industry.
Upon completion of the recruitment process, MPE provides the relevant minister with names of persons who qualify to be members of the board, and who are recommended as being most suited to serve on the board.
However, PEGA states that the relevant minister is not bound to the recommendations made by MPE. However, they must provide specific reasons in writing for not accepting a recommendation made.
PEGA’s shortfalls
The problem with this provision in PEGA is the amount of discretion it gives to political appointees in the form of ministers after a legislated process was followed. It gives ministers the power to appoint their preferred candidates to boards, circumventing a formal and transparent recruitment process which took into consideration the requisite skills for directors, as stated above.
Ministers end up removing names of persons who are not amenable to their nefarious advances.
They often prefer those easily manipulated to serve their purposes, or those who are politically connected but do not pass the ‘fitness and proper’ test to hold a position of director at any entity.
An example is the disgraced former South African Airways (SAA) chairperson, Dudu Myeni, who was declared a delinquent by the High Court in Pretoria due to her conduct while leading the SAA board. Myeni’s appointment to the board was attributed to her proximity to former president Jacob Zuma, with no regard for her lack of capabilities to serve on the board of SAA.
Another shortcoming of the discretion given to ministers on the appointment of board members is the cumbersome recruitment process followed.
Many competent professionals would like to serve on public enterprise boards. However, the cumbersome process is discouraging, as one must wait for hours when invited to interviews before you are called in, and the final decision is made not less than three months later. Candidates are not formally informed of the final outcome when unsuccessful, but rely on the grapevine.
It is a common occurrence where applicants would hear, from the grapevine, that they were recommended, but that the minister opted for someone else, therefore removing them from the list.
The reasons for the removal is often not substantive but sociological, like gender, tribe, race, strong personality traits, political affiliation, dissenting views, non-conformism, personal grudges, etc.
Lastly, the competent panel will also have wasted their time going through an arduous interview process, just for their recommendations to be disregarded.
If the ministry of public enterprises, as stated by its former minister, wants to see public enterprises succeed and grow, it is vital for the clauses under sections 8(4) and 9(4) of PEGA, which give ministers powers to disregard the formal recruitment process of directors, rescinded or revised to curtail the powers of ministers to interfere in the appointment of directors of public enterprises.
Otherwise, much-needed competent professionals with the requisite skills to drive these enterprises will stay clear of public enterprises, and the poor performance of some enterprises will continue.
* Nambata T. Angula is an executive at a public enterprise, and a law scholar. These are her personal views.