SOE Boards – Battlegrounds For Political ‘Proxy’ Wars

GOOD governance requires directors of a company to act with skill, care, diligence and good faith towards a company they are overseeing on behalf of its shareholders.

A company in terms of the law is a juristic individual with rights and obligations governed by legislation, company policy, corporate culture and the objectives of the business in the form of its mission and vision. As such, a company and its board of directors are required to act in accordance with principles of “fairness, accountability, responsibility and transparency on a foundation of intellectual honesty”.

The Namibian newspaper of Monday, 3 December 2018 reported that former agriculture minister John Mutorwa was found to have not acted with an ‘open mind and readiness to listen to reason’ in the appointment of the board of directors for the Meat Corporation of Namibia. In a judgement read out by High Court judge Hosea Angula, it was found that Mutorwa, then minister of agriculture and appointing authority of the Meatco board’s “insistence on unwarranted adherence to fixed principles and strict observance of formal communication channels and protocols, under those circumstances, was grossly unreasonable”. What judge Angula is referring to in his judgement, according to Mervin King, is the elusive notion of human frailty as the shareholders’ representative and appointing authority. In adhering to the principles of good governance by observing formal protocols, the minister is found to have made a bad business judgement call, a costly/innocent mistake, a catch-22.

State-owned enterprises (SOEs) are unique in character because they exist at an intersection of corporate interest driven by a profit motive and political interests in the way these entities are governed. NamWater ought to be self-sustaining, given its monopoly in the supply of water throughout the country. It operates with a distinct competitive advantage. However, its ability to remain profitable whilst ensuring water supply for all of Namibia’s inhabitants is threatened by political interference, whether rightly or wrongly so. Due to arrears in the payment of water supply by the Rundu Town Council, water at the town was disconnected. These events presented a window of opportunity for exploitation of those in arrears and would-be politicians to latch on by painting NamWater and by extension the government and the ruling party as insensitive to the needs of the community and society in general through acts of denying citizens access to water, which is regarded as a human right. Catch-22!

SOE boards are mired in dysfunction due to their inability to strike a balance between the interests of the company, the political interests of its shareholder/s, and the self-interests of the individual directors governing the boards. King’s code of good corporate governance makes pertinent a universal truth that processes adopted in governing an enterprise should not be rigid, but ought to be flexible enough to adapt to the unique micro and macro circumstances within which the entity operates.

Jobs-for-comrades, an idea mooted by ruling party functionaries who otherwise do not have the requisite academic qualifications or management expertise to take charge of corporate enterprises, introduced a system of patronage that undermines the effective management of SOEs.

By appointing members of the ruling party onto corporate boards without giving due regard to their ability to perform the required fiduciary duties and responsibilities towards the company, the ruling party effectively sets these enterprises up for imminent failure.

The establishment of the Ministry of Public Enterprises and the future enactment of the State-Owned Enterprises Governance Act will hopefully correct this mistake in establishing set guidelines and qualifications for individuals to serve on the boards of public enterprises.

State-owned enterprises have become battlefields for political proxy wars, which are instigated by puppet masters who have old scores to settle. These wars have manifested in the past at institutions such as the Namibia Qualifications Authority, the Namibia Airports Company, TransNamib, the Social Security Commission, the National Commission on Research, Science and Technology, and most recently, Meatco and the Central Procurement Board. By adopting principles of good governance and adhering to the legislative provisions of the State-Owned Enterprises Governance Act, hopefully these fights will come to an end.

However, corporate entities live and find identity in those who manage and oversee them. If those individuals are not fit and proper stewards to begin with, the company itself will not be a good corporate citizen.

* Vitalio Angula is a socio-political commentator and independent columnist. The principles for governance addressed in this article are borrowed from Mervin King, author of the King Code for Good Governance.

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