Policy Brief 44: Civil Society, Citizens and Consumer Activism Crucial to Increase State-Owned Company Performance

Ordinary citizens, consumers, and civil society must play more active roles as shareholders of state-owned enterprises than is currently the case, as activist shareholders in private companies do, to hold these entities accountable.

Since SOEs are taxpayer-funded companies, citizens should be seen as shareholders of these companies. When ordinary citizens, civil society, and consumers hold SOEs accountable as shareholders, they exercise active citizenship. Citizen shareholder activism is the missing link in holding runaway SOEs accountable.

Several private sector shareholder activists have taken on private companies regarding their corporate governance, remuneration, and environmental, social, and governance-related issues (Viviers 2017; Davids and Kitcat 2020). Theo Botha, the private sector shareholder activist, who regularly interrogates companies at annual general meetings about corporate governance, board compensation, and operational practices, provides an example to emulate in SOEs.

Several civil society organisations, such as Just Share and the Centre for Environmental Rights, have engaged private sector companies on environmental, social, and governance performance. Theo Botha and the Raith Foundation in 2019, at Standard Bank’s annual general meeting, asked for climate change resolutions to be adopted on the company’s assessment of greenhouse gas emissions in its financing portfolio and to adopt a policy on lending to coal mines and coal-fired power stations (Davids and Kitcat 2020).

In 2018, Theo Both and the Raith Foundation also joined forces to propose a resolution at the AGM of Sasol, asking the JSE-listed energy and chemical company to annual prepare reports about its plans to tack greenhouse emissions in SA. Sasol is one of the largest emitters of greenhouse emissions in SA. Sasol rejected the resolution.

However, South Africa does not have an extensive culture of citizen shareholders, civil society, and consumer activism holding SOEs accountable. Civil society organisations, the Organisation Undoing Tax Abuse (Outa) and SA Airways Pilots Association (Saapa) showed the way in citizen shareholder activism when they lodged an application to the High Court in March 2017 to have former SAA chairwoman Dudu Myeni declared a delinquent director for her appallingly destructive mismanagement of the state airline.

Myeni was subsequently declared a delinquent director by the North Gauteng High Court, unfit to operate as a company director. Sadly, these civil organisations had to seek help from the courts after the government lacked the political will to act against Myeni’s destruction of value, jobs, and services at SAA.


SOEs too critically important to escape citizen and civil society oversight

Corruption, incompetence, and mismanagement at Eskom, through the appointment of politically connected, incompetent executive and boards, the gifting of tenders to companies connected to the ANC, which either inflate prices or provide poor services, is responsible for the power outages which have wiped existing businesses, deterred new investments and led to capital and skills flight. The lack of housing, water delivery, and effective public transport is due to corruption, mismanagement, and incompetence at service delivery SOEs and has increased the poverty, inequality, and unemployment legacies of apartheid.

Chronic instability, incompetence, and corruption at the state-owned rail, port, and logistics state-owned companies have decayed South Africa’s rail, port, and logistics infrastructure into decay. Transport Minister Fikile Mbalula said corruption and incompetence at the Passenger Rail Association of SA had decimated the community rail stations, infrastructure, and trains.

SOEs guzzle up large amounts of scarce taxpayers’ money, with little returns, in terms of services, products, or profits. Conservative estimates showed that these entities’ appalling inefficiencies, waste, and corruption had sucked more than R1trillion taxpayers’ money alone in the past decade.

Public funds that disappeared into the black hole of SOE support are one of the reasons South Africa now is in such a financial crisis that it had to seek US$4.3bn from the International Monetary Fund to fund Covid-19-related reconstruction initiatives.

Malfunctioning SOEs have many opportunity costs incurred by not pursuing alternatives to these resource-sapping SOEs. Money is being diverted from essential public services such as education, health, and housing to SOEs, only to be flushed down the drain of incompetence, waste, and corruption.

SOEs crowd out the private sector, preventing entrepreneurs from starting businesses and creating new jobs and growth in the sectors dominated by these SOEs. They significantly contribute to rising taxes, ballooning public debt, and increasing public expenditure cuts on essential public services.

Last year, the Auditor-General reported that irregular expenditure in SOEs reached R100bn in the 2021 financial year. The top three contributors to irregular expenditure were Transnet (R56.3bn) and Eskom (R11.2bn), and the Airports Company South Africa (R600m). In that same financial year, 21 SOE entities, out of 55 large ones, declared to the Auditor-General, that they would not be able to continue as going concerns unless they were bailed out. These included Eskom, PetroSA, the Central Energy Fund, and the South African Broadcasting Corporation.

Last year, the 55 large SOEs ran a deficit of over R64.95bn – which the state had to provide through bailouts or guarantees. A few SOEs are either under business rescue or in provisional liquidation.

Government guarantees to SOE debt increased almost 300% from R129bn in 2019 to nearly R600bn by financial year-end 2020. The government’s rising exposure to SOE debt through its guarantees of SOEs debt has been a significant reason for the rapidly ballooning public debt. Debt servicing costs are the fastest growing expenditure item in the South African Budget. It is predicted to grow 16% per annum in the 2021-2023 Budget period, reaching 16.5% of total spending in the financial year thereafter.


Citizens and civil society need to influence SOE annual general meetings

All state-owned companies should have annual general meetings. This should be part of transparency, accountability, and good corporate governance. In its Guidelines on Corporate Governance in SOEs, the Organisation for Economic Co-operation and Development (OECD) said: “Ensuring a high quality of transparency and accountability is the very basis of any sound corporate governance regime. Information disclosure and higher standards of accountability in SOEs can contribute to improved efficiency and performance of SOEs” (OECD 2020: 13).

In Norway, for example, SOEs must strive to be as transparent as listed companies (OECD 2020). In general, “Information disclosure including both financial and nonfinancial data is essential for the government so that it can be an effective owner; the Parliament to evaluate the performance of the state as an owner; the media to raise awareness on SOE efficiency; and taxpayers and the general public to have a comprehensive picture of SOE performance” (OECD 2020: 13).

In practice, shareholders, stakeholders, and activists could challenge company strategy, ask questions about activities, and hold boards and management accountable at the AGMs of companies.

However, many South African SOEs do not organise AGMs. For another, SOE annual general meetings (AGMs) are generally secretive affairs; information about them is not widely publicised and not open to the public. This lack of transparency undermines good corporate governance and makes it difficult for citizens, civil society organisations, and stakeholders to access information about these entities to hold them accountable.

Even when AGMs have organised, the information from SOEs is usually poor. Last year, the Auditor-General said the financial records of SOEs are often so poor that in the previous financial year, 17 out of the 55 entities audited by the Auditor-General, financial records were so poor that they were unreliable for financial analysis.

Nevertheless, it should be mandatory for SOEs to have AGMs. Information about the AGMs should be widely publicly distributed. It must become mandatory for SOEs to open their AGMs to ordinary citizens, consumers, and civil society. As “shareholders”, by virtue of paying taxes, civil society organisations, consumers and ordinary citizens must become “activists” and attend SOE AGMs, and pressure the management of these organisations to govern ethically.

Citizens, consumers, and civil society organisations should be voting rights at SOE shareholder meetings. Citizen shareholder activists should take on SOE executives and boards at annual general meetings and hold them accountable for the entities’ performance, board and management remuneration and strategy.


Civil society and citizens should hold monitor SOE executive and board pay

SOE executives and boards receive huge remuneration packages and annual bonuses, yet these entities are loss-making, fail to deliver services and are frequently bailed out with public funds. The excessive remuneration of executives and board members of failing state-owned entities has not only given the managers in these organisations no incentives to become efficient, honest, and accountable but has added to the ballooning public debt burden.

The last SOE remuneration guidelines, only applicable to the remuneration of board members, were issued in 2007 before the 2007/2008 global financial crisis outbreak. Beyond these outdated guidelines, there is no other policy to oversee SOE executive and board remuneration, beyond the remuneration set by the entity’s board.

Although SOEs should, in theory, send their remuneration and incentives schemes for sign-off to the departments overseeing them, this rarely happens. Neither do SOEs send their remuneration policies to regulators or the National Treasury before implementation. In late 2019 Cabinet stated that future SOE remuneration and incentives schemes should be based on income statements rather than their balance sheets, which is currently the norm in most cases. This has not happened.

In 2016, executives of PetroSA, the state oil company, received R17.3m in bonuses, despite the organisation making an R14.bn loss that year. The former CEO of the Road Accident Fund was paid nearly R4million in the 2017/2018 financial year for working for three months of that year. He received an R2m performance bonus. That year, the RAF’s bank account had been attached by the Sheriff of the Court over R8bn of unpaid debts.

Eskom executives received massive bonuses during periods of financial failure and load shedding. As a case in point, in the 2010 financial year, Eskom executive directors received a 25% increase in remuneration to maintain adequate coal stockpiles and an uninterrupted electricity supply.

South Africa urgently needs a new, more sustainable SOE remuneration policy to guide executive and board remuneration. Such a remuneration policy must be based on performance rather than solely on a company’s balance sheet.

Many countries immediately after the 2007/2008 global financial crisis introduced pay limits for executives and boards of SOEs. Since the 2007/2008 global financial crisis, countries recently have introduced one of two kinds of reforms: capping executive and board pay at all entities; secondly, capping and cutting executive and board pay when companies make losses; and thirdly, cutting executive and board pay even when companies make profits.

In the private sector, activist shareholders have often successfully pushed for the rejection of extravagant executive and board remuneration. In 2020, Old Mutual and Shoprite, two Top 40 listed companies, saw shareholders vote against the remuneration of executives. Citizens, civil society, and consumers must similarly, at SOE annual general meetings, object to extravagant remuneration packages for executives of failing companies.

Remuneration and incentives for both boards and executives of SOEs should be made public. Citizens, civil society, and the media must object to extravagant remuneration packages for executives and board members of failing companies at SOE annual general meetings.


Civil society and citizens should get involved in board and executive appointments at SOEs

Incompetent boards and executives are among the significant reasons for SOEs’ failures. Appointments to boards and management are heavily politicised. The ANC’s deployment committees directly propose boards and CEOs for SOEs.

SOEs boards require the right people, with the right skills, at the right time. Both members should also add value to the business of an SOE (Christiansen 2014). Yet most SOE boards lack industry-appropriate skills, professionals, and demographic diversity. Politically exposed individuals are recycled from board to board, bringing failure to every board they are appointed to. Chapter 10, Section 195 of the Constitution clarifies that democratic values, fairness and competency should underpin public administration and must guide SOE appointments.

Through the deployment policy, the ANC leadership deployed cadres in crucial positions in SOEs, whether as CEOs or chairs of SOEs. Former Public Enterprises Minister Barbara Hogan, during her testimony at the Zondo commission last year, Hogan claimed that certain structures of the ANC saw themselves as having powers to make appointments in state-owned enterprises during Zuma’s tenure. Hogan claimed that former President Jacob Zuma insisted on installing executives with questionable backgrounds in SOEs and on their boards.

Appointments to SOE boards and managers are often opaque, shrouded in secrecy and appear not rational. There must be transparency and public and media access to information about the SOE board and management appointments. Potential conflicts of interest should be strictly policed. Civil society and citizens should monitor whether there are conflicts of interest among the SOE board and management members.

The constitutional requirement for fairness in appointments is mainly ignored in SOE appointments. With exceptions, there are few legal requirements for public participation in appointments to management and boards of SOEs. There are no standardised criteria for appointments, which results in poor-quality appointments.

For another, there is a concentration of power of appointments in the executive. Executive authorities (line ministries) have vast discretionary power over appointments. The president also has extraordinary massive powers to appoint, confirm or veto almost all CEOs and chairs of large SOEs. The president has a final sign-off on nearly all appointments.

Many countries have strict laws to limit the politicisation of SOE boards (Christiansen 2014). Civil society organisations and citizens should campaign for the depoliticisation of boards and management appointments.

Politicians should be barred from SOE board appointments. Civil servants who occupy full-time jobs in the public service should be banned from SOE board appointments. Politically exposed individuals should also be barred from boards. Civil society organisations should insist on public participation in SOE board appointments. In fact, civil society should push for legislation to make public participation in board appointments compulsory.

Civil society organisations should insist on regular lifestyle audits for SOE board members. There also must be regular assessment of the performance of SOE board members – and these must be made publicly available.

SOEs need the right people, with the right skills, at the right time. Civil society should actively nominate credible candidates for SOE boards and management appointments. There should be standardised rules for legibility for being SOE board members and for removing errant ones. Citizens and civil society organisations should insist that long lists of SOE board nominations be made publicly available; and that those rejected should be compared to those appointed to board positions.

There should be formal mechanisms for civil society and citizens to contest dodgy management and board appointments. Civil society and individual citizens should contest irregular board and executive appointments. Failing this, citizen shareholder activists should go to courts to challenge such poor SOE board appointments.

They must also target failing but politically connected board members for dismissal and have incompetent, corrupt and neglectful board members and executives declared delinquent, as Outa and (Saapa) did in the case of the SAA’s Myeni. Civil society organisations should draw up lists of compromised individuals who should be barred from SOE board and executive appointments.


Civil society and citizens should play a role in oversight of awarding of tenders

There must be greater public participation in the awarding of tenders by SOEs. All SOEs’ tender award deliberations should be in public. Citizens, civil society, and the media should sit in tender award decisions deliberations. There should be a consideration for citizen or civil society representatives to be part of tender award committees to see if these awards are fair.

Fake companies securing tenders from SOEs should also be exposed in public, in media, and courts. Citizens, civil society, and the media must work to get such companies blacklisted from tendering for government services. Most irregular spending, wasteful spending and corruption occur in the SOEs’ procurement system. Providing services for SOEs has become a lucrative arena for well-connected ANC cadres and the party. Cleaning up the procurement system of SOEs, which means income loss for many ANC-linked businesses and the party itself, will naturally be strongly resisted.

Former Passenger Rail Authority of South Africa (PRASA) chairperson Popo Molefe has alleged in court papers that the supplier of Prasa’s Afro 4000 locomotives had insisted that 10% of the tender’s value be paid to the ANC as a party. The ANC in the post-apartheid era also established Chancellor House, the investment arm of the ANC, secured significant stakes in government contracts, black economic empowerment deals and shareholdings in private companies doing business with the government.

Chancellor House’s bid for government tenders in partnership with private companies. For example, through its Chancellor House Trust, Chancellor House was gifted a 25% stake in Hitachi Power Africa, now Mitsubishi Hitachi Power Africa, which was awarded an R20 billion deal in 2005 to build all six boilers at Eskom’s Kusile and Medupi power stations. Chancellor House made a 5 000% return on its partnership with Hitachi.

In 2015, the US Securities and Exchange Commission (SEC) launched an investigation into Hitachi for its business partnership with the ANC’s Chancellor House, deeming it an irregularity. To stop the SEC investigating, Hitachi, in September 2015, offered to pay US$19m to the US regulator.

The Eskom power projects ran years late and billions of rands over budget – contributing to the power outages South Africa is experiencing, which has slashed growth, caused the closure of thousands of businesses, and plunged many into unemployment and poverty. According to the latest political party donor report by the Independent Electoral Commission, Chancellor House was the ANC’s biggest donor in 2021, donating R15m in August this year.

When a governing party has shares directly, through subsidiaries or trusts in a commercial company doing business with the state or exploiting natural resources, a conflict of interests may emerge where the company’s activities may be gone against the public interest. A governing party must always govern in the country’s interest, not in the interests of the party or its leaders, nor the interests of a third party; like a business, the party of its subsidiaries have shares in or from which commercial activities the party benefits.

Governing parties and their subsidiaries should not be allowed to do business in any form with the government entities they govern, whether at the national, provincial, or municipal level; neither should they be allowed to do commercial business with private companies. Civil society organisations should campaign to force the ANC and other parties not to have investment companies or tender for SOE contracts.

There have been several successful court applications of failing bidders challenging corrupt SOE tenders and have these awards set aside. Not only should falling bidders in rigged tender awards seek redress in court, but citizens, civil society and users or consumers should also take SOEs to court when they see that incompetent companies have been fraudulently awarded tenders to provide services and products. Civil society should also take corrupt SOE tenders to court.


Citizens, civil society, and consumers must hold SOEs accountable for service delivery

Citizens, consumers, and civil society organisations must also protest more about shabby services, products, and treatment by SOEs. Citizens who consume products and use services of SOEs must form consumer groups to pressure these entities to be more accountable. There is a solid case for SOEs delivering public services to have user forums, including customers, watchdogs, and community groups, to monitor the quality of services of these entities, whether they fulfil their social obligations and hold them accountable.

Many SOEs, such as Eskom, are monopolies in their sectors and, therefore, often do not care about providing quality services because there are no competitors to which customers could turn as alternative suppliers. Many SOEs’ arrogance, indifference, and callousness towards their customers, suppliers and stakeholders are astonishing. Because many SOEs are monopolies, with no competition, with captured customers, and assuming they will be bailed out when in trouble, they do not appear to care about service quality.

It should be compulsory for all SOEs to introduce citizen and consumer satisfaction surveys, and these results are made public. SOE employee performance should be measured partially based on the results of these citizen and consumer satisfaction surveys.

When Johannesburg City Power was formed as a ring-faced municipal SOE, there was a requirement that the entity establishes a User Forum – which had to include customers, civil watchdogs, and community groups, which could play an additional oversight role over the entity (City Power 2001). However, it never came to pass.

Nevertheless, establishing genuine Consumer and User Forums and Customer Charters, which involve customers, civil society and stakeholders, may help monitor whether SOEs fulfil their contractual, social and delivery obligations and hold them accountable.

In many countries, such as Canada, Singapore, and South Korea, SOEs must consult local communities before they embark on new projects in their areas. In South Africa, this is not the case. Citizens, local communities, and civil society organisations should insist they get consulted about and incorporate their concerns on new developments by SOEs in their areas.


Citizens, civil society, and media oversight over SOEs’ finances

Most SOEs’ financial management of assets, resources, and budgets are shockingly dire. Eskom has R450bn debt. Most SOEs post deficits. In the 2019/2020 financial year, Eskom posted a deficit of R20.5bn, PetroSA posted a deficit of R5.57bn, the SABC of R511m, and the Central Energy Fund of R334m. In the same financial year, at least 21 SOEs entities, out of 55 large ones, officially declared to the Auditor-General, that they would not be able to continue as going concerns this year unless they are bailed out (Auditor-General 2021). These included Eskom, PetroSA and the South African Broadcasting Corporation.

Furthermore, in the same financial year, the Auditor-General (2021) reported that the auditing of the finances of many SOEs could not be completed because their financial records were so poor. Out of the 55 entities, the financial statements of 17 were so poor that they were unreliable for financial analysis, including the Passenger Rail Agency of South Africa, responsible for passenger rail services.

Many SOEs repeatedly fail to complete their annual financial statements. In the Auditor-General’s 2018/2019 consolidated national and provincial audit, SAA, the South African Energy Corporation, for the second year in a row for that matter, and the Trans-Caledon Tunnel Authority failed to submit their financials. Citizen shareholders must push to have executives and boards fired for not returning their companies’ annual financial statements.

In April 2021, the Land Bank defaulted on R50bn of loan repayments; in June, it failed to make interest payments of nearly R120m. The National Treasury subsequently granted the Land Bank R3bn emergency equity funding.

Denel, the state defence firm, received R1.8bn as a bailout from the Treasury in 2019 and was promised another R576m in 2021, dedicated to debt payments. The SABC projected a shortfall of R1.5bn in revenue in the 2020/2021 financial year. The SABC was given an R3.2bn bailout in 2019/2020 on the condition that it meets certain conditions as part of a turnaround strategy. The Post Office expected a loss of over R1bn for the 2021 financial year. It has received R8bn in bailouts over the past four years.

A business rescue plan for SAA was estimated at around R40bn if it includes securing working capital, paying debtors and retrenchment costs. The Central Energy Fund, in a presentation to Parliament’s Portfolio Committee on Mineral Resources and Energy in 2021, said that to restructure PetroSA will need R15bn. The Central Energy Fund (CEF) itself has been on financial life-support. Several previous turnaround strategies of the CEF had failed dismally.

Many failing SOEs seeking public bailouts have had no turnaround plans. Others who have been bailed out on the basis that they would implement turnaround plans either did not have such plans and if they have, they were not implementing them. Continuing bailouts to failing SOEs without any turnaround conditions or enforcing these conditions will add to SA’s post-Covid-19 economic woes.

Citizens, civil society, and the media must monitor whether failing SOEs have turnaround plans, which should, at the minimum, include recruiting the best talent in the country on merit, changing their business model, getting rid of non-core assets and non-performing staff, tackling procurement corruption, and seeking strategic equity partners where possible.



South Africa’s failing SOEs are unlikely to become efficient, productive and have any developmental impact unless they are held as accountable to the public as listed companies are to their shareholders (OECD 2020). Civil society, citizens and consumers have an essential role as shareholders in holding SOEs accountable.

Citizen, civil society, community, and customer oversight are missing in holding SOEs accountable. Yet, without pressure from civil society, communities, and customers, it is doubtful that South Africa’s SOEs will become efficient, less corrupt, and more responsive. Given the lack of political will to turn around failing SOEs and the fact that they are likely to get more taxpayer-funded bailouts, citizen shareholders are absolutely crucial to holding these entities accountable.



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Constitution of the Republic of South Africa (1996), Chapter 10, Section 195

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William Gumede is Associate Professor, School of Governance at the University of the Witwatersrand. He is Executive Chairperson of Democracy Works Foundation and former Deputy Editor of The Sowetan newspaper.

During the anti-apartheid struggle, Gumede held several leadership positions in South African student, civics and trade union movements. He was a political violence mediator and area coordinator for the National Peace Committee during the multiparty negotiations for a democratic South Africa and was seconded to South Africa’s Truth and Reconciliation Commission. He is the author of several number 1 bestsellers. His more recent books include: Restless Nation: Making Sense of Troubled Times (Tafelberg); and South Africa in BRICS – Salvation or Ruination (Tafelberg).

To read publications by William Gumede on our website please click here.

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