This research examines the operational and financial shortcomings of South African State-Owned Companies (‘SOCs') which is shown to primarily stem from a lack of enforceable accountability. The resolution of this accountability issue begins with the identification of SOCs. An analysis is undertaken of the predominant statutes with which SOCs are required to comply: the Public Finance Management Act and the Companies Act. An examination of these statutes, together with relevant case law and secondary sources, reveals contradictory, convoluted and confusing provisions relating to the definition and categorization of various State-Owned Enterprises (‘SOEs') and SOCs. A complete overhaul of these statutory definitions and categorisations is required through the enactment of an overarching legislation to govern all aspects relating to all SOEs, under which SOCs will be subsumed, as was previously proposed by the Presidential Review Committee on State-Owned Entities in 2012. The various accountability mechanisms, which should currently be implemented by SOCs, are analysed in terms of primary and secondary sources of law. This analysis divides the mechanisms into two distinct categories: internal and external mechanisms. Internal accountability mechanisms include: the directors, the board and its committees, the role of the company secretary and internal audit and the state, as the sole shareholder of the SOC. The external accountability mechanisms include: the external audit, the role of the Auditor-General and Public Protector, the legislature, the judiciary and the public, as the ultimate stakeholder of the SOC. Notwithstanding the availability of these accountability mechanisms, SOCs still fail to actually account for their continued underperformance. Research conducted through a direct analysis and interpretation of the annual, integrated reports of South African Airways SOC Limited (‘SAA'), from 2012 to 2017, will illustrate the inability of an SOC to effectively account for its performance. It is shown that one of the significant challenges which contributes to the accountability issue facing an SOC stems from the fact that the state is its sole shareholder. Evidence from this case study, together with that garnered from the investigation of the Zondo Commission of Inquiry into State Capture, will conclusively unveil the significant accountability issues experienced by many SOCs in South Africa. There is limited case law on the corporate governance and accountability of SOCs, however, an examination of secondary sources of law illustrates the growing trend for the board of an SOC to implement 3 corporate governance structures to achieve accountability. However, it is submitted that corporate governance, whilst popular, may not be the best method for achieving the accountability of SOCs. A structured framework entailing the enforceable accountability of SOCs is proposed as a solution to the accountability issue through the implementation of a reward-based system which incentivizes the board of an SOC, and the state, to achieve real and significant accountability. This system requires the establishment of an independent rating agency which will rate the accountability of an SOC. The rating of the SOC will be linked to the provision of state funding, with maximum thresholds based on specific rating levels. The board of an SOC will retain the discretion of deciding which mechanism is to be instigated to attain actual accountability, of which corporate governance is just one method. The board of an SOC, and the state, will be incentivized to achieve a high rating level in order to secure preferential state funding. This reward-based enforcement mechanism for the accountability of SOCs will require legislative reform through the enactment of overarching SOE legislation to govern all aspects relating to SOEs. In addition, legislation will be enacted to establish an independent rating agency, akin to the state institutions established under chapter nine of the Constitution. The implementation of an effective enforcement mechanism will result in the achievement of actual and significant accountability for SOCs which will ultimately improve their performance and reduce their reliance on the state's scarce resources.
| Identifer | oai:union.ndltd.org:netd.ac.za/oai:union.ndltd.org:uct/oai:localhost:11427/33996 |
| Date | 22 September 2021 |
| Creators | Stevens, Angela Gail |
| Contributors | Yeats, Jacqueline |
| Publisher | Faculty of Law, Department of Commercial Law |
| Source Sets | South African National ETD Portal |
| Language | English |
| Detected Language | English |
| Type | Doctoral Thesis, Doctoral, PhD |
| Format | application/pdf |
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