Do Namibia’s SOEs Have What It Takes?

I often wonder whether state owned enterprises (SOEs) have what it takes?

Having served on a number of SOE boards, it is my conviction that some boards are just there for window dressing.

In fact, how some SOE board members are appointed leaves much to be desired.

Regrettably, although the Public Enterprises Governance Act sets out how SOE directors should be appointed, there are still conflicting interpretations of certain provisions related to such appointments.

This allows political appointing authorities to take advantage of the situation and to nominate and appoint cronies sympathetic to their political agendas.

QUESTIONS THAT NEED ANSWERS

It is no secret that some SOEs underperform and expect constant bailouts while their directors happily receive enormous fees, despite having a duty of oversight.

This underlines pressing questions that need to be answered.

Are directors appointed on merit? Do they have the necessary qualifications, skills, experience and expertise to serve on such boards?

Do they understand their fiduciary responsibilities?

I believe there needs to be a proper audit to provide answers to these questions.

It is no secret that some SOE boards are not held to account if they fail to discharge their fiduciary responsibilities.

The Public Enterprises Act is clear that directors should sign performance agreements immediately after they are appointed.

If they do sign such agreements, are there mechanisms in place to monitor their performance?

If there are such mechanisms, why do some SOEs continue to underperform and need constant bailouts?

In my view, some of these institutions are headed by incompetent management cadres and boards.

Some board members serve on two if not more than three boards. Then there is the recycling of board members from one board to the other.

Is this an element of good corporate governance?

It appears that some boards are used as cash cows and not to serve the interests of the organisation to which they’re appointed.

LEGAL LAPSE

In a recent High Court judgement involving a protracted case – over many years – between an axed chief executive officer and an SOE, the SOE was ordered to pay the CEO millions of dollars.

The judge found that the SOE failed to prove its case on a balance of probabilities and, to add insult to injury, that “the costs must follow the result”.

Having read the judgement, it is evident that the witnesses for the SOE made a mockery out of this case. No wonder it was dismissed with costs.

If the matter had been settled out of court at an early stage, it could have saved the SOE, and the state, millions of dollars.

One wonders why the SOE opted to enter into a legal battle with the axed CEO if it didn’t have adequate legal recourse in the matter?

It begs the question: Will the SOE’s directors be held accountable for this mess and for wasting state resources? Will any action be taken?

I don’t want to generalise about SOEs. It is common cause that some SOE boards do try their level best to discharge their responsibilities.

INTENT IS HALF THE BATTLE

It doesn’t take rocket science to turn around underperforming SOEs.

If there is serious intent, the first thing to do is to appoint board members and management cadres on merit and to ensure they have the requisite qualifications, skills, experience and expertise.

Secondly, directors should receive rigorous training on their fiduciary responsibilities.

Thirdly, they should be held accountable for their actions.

Fourthly, performance agreements must be put in place between the board and appointing authorities, and should be monitored on a regular basis. 

Fifthly, boards must ensure that they also recruit the right management cadres to run such organisations.

Directors should guard against manipulation by appointing authorities, and appointing authorities should guard against appointing cronies to push individual agendas.

’DO OR DIE…’

There is no reason for any SOE to underperform if they have the requisite skills, qualifications, experience and expertise on board. 

Political interference must be avoided at all costs. It is imperative that appointments be based on merit.

Also, when board terms expire, they should be replaced immediately.

I am aware of cases where it took more than a year to appoint directors. This is poor corporate governance.

Finally, if the method used to recruit boards does not yield the desired results, the process should be seriously reviewed.

Failure to adhere to the above is a recipe for disaster for SOEs.

• • Raimo Naanda, is a retired TVET Expert