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Home / Opinion - Acts provide direction  for SOEs

Opinion - Acts provide direction  for SOEs

2021-09-06  Staff Reporter

Opinion - Acts provide direction  for SOEs
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For a state-owned enterprise (SOE) to implement projects, they must adhere to the Public Procurement Act of 2015, or as updated. When the board or top management at times makes commitments that have significant impacts on the organisation, expository decision-making experience is a prerequisite. However, the leaders need to be pliable to enable them to recall terrible decisions made by them.

The operations of SOEs fall under various Acts.  Some of the acts are stumbling blocks to their smooth operation and for the execution of some projects and technical tasks. The challenge is that there are no guidelines as to which act supersedes which act. At times, as the board and top managers carry out their duties, they are faced with challenges of which act to apply before which act. 

This challenge is ever-present and posing difficulties for the shareholders’ representatives or the ministers carrying out their duties in the best interests of the government. This is in the case in the dismantling of Air Namibia and the Namdia diamond valuation contract. Regarding Namdia, the ministers contravened the Procurement Act, but respected the Corporate Governance Act. In most cases, when SOE decisions are made, we need to ask for the decision that was made under the Companies Act context, so let us not be too quick to conclude.

 The acts are clear on what is allowed and what is not allowed, as they are periodically updated. The organisation thus needs to be aware of the updates and implement them accordingly.  A good relationship between the organisation and the board is critical. Strangely enough, the Procurement Act is in conflict with some other acts. Like the Companies Act, the board members feel that individual board members have no fiduciary duties towards the organisation. However, those very duties are in conflict with other acts which provide direction to the SOEs, and confusion and heated arguments can easily arise. 

The Companies Act regulates SOEs, as SOEs, which are also companies, for SOEs to implement projects; SOEs need to adhere to the Public Procurement Act of 2015; there are several acts that SOEs need to adhere to; however, it has also hindered the operations of many SOEs. The Companies Act provides the board with fiduciary duties towards the organisation, and provides the top managers with the power to direct the organisation in realising its strategic intent.

 However, ministers should refrain from active ownership of SOEs, and the board should provide the strategic and public policy objectives to the SOEs. However, the CEOs implement the formulated and approved corporate strategy within the framework of the approved corporate objectives. The board assesses and monitors management performance; the top organisational leadership appointment is by the board. The government should not take part in hiring for SOEs, as the board should hire and fire the CEO, if applicable. The CEO manages the operation, implements the organisational strategy, and is accountable to the board. But the board and the top managers, in carrying out their duties, are faced with a challenge of which act to apply before which act. 

One of the board’s responsibilities is to ensure that the organisation is in compliance with its regulatory requirements, and to provide the organisation with the necessary resources needed for the survival of the organisation. However, these boards are frequently risk-averse, and the organisation might not meet its regulatory requirements, for example the NHE and a number of SOEs’ inability to meet regulatory requirements, leading to poor performance by the organisation. The committees of the board are entrusted with the responsibility which is concerned with the future of the organisation, and has a plan that enables the organisation to survive. Some of these boards deliver successfully.

The Procurement Act sets out guidelines and rules. The acts and the procurement regulations are critical, but they are not working for the commercial SOEs that need to compete in the industry. Acts, like the Labour Act, are critical for the safety of the environment. The act clarifies various procurement types, what SOEs can do, and what SOEs cannot do explicitly. SOEs should update the acts as they change, and the legal department should explain how they affect the SOE’s operations.

Ethics and the Corporate Governance Act guidelines are critical, and proper reporting between the organisation’s top leader and the board is essential to curb malicious stories. Organisations should ensure that they implement regulations or corporate governance policies that guide the board, and guide their responses and decisions. The shareholders provide essential resources. However, they should not be involved in the organisation’s operations because the executives are employed to run the day-to-day management of the organisation.

Dr Rauna Shipena is a doctor of management graduate from Colorado Technical University in the USA. Her doctoral degree concentration is in executive leadership (Organisational Corporate Governance Leadership).  A scholar-practitioner who can be contacted at: drshipena@royal-ambassadors.com 


2021-09-06  Staff Reporter

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