The monitoring of state owned enterprises (SOEs) by the Department of Public Enterprises has been "very weak", Public Enterprises Minister Pravin Gordhan said in Parliament on Wednesday.
He was briefing the public enterprises portfolio committee on the steps being taken to "recapture" and stabilise SOEs — including Eskom, Transnet and South African Airways (SAA) — with the aim of returning them to financial sustainability.
The first priority was to get the boards and management teams, and to orientate these companies, on the right footing. This has been the focus of the past few months.
Gordhan said during the period when state capture was prevalent in SOEs, the department had largely relied on quarterly reports from the companies. "The kind of monitoring of the actual core business and finances of these state-owned companies by the department is generally weaker than it should be."
Reliance was placed on quarterly reports without a lot of closer understanding of the businesses and their revenue and expenditure streams, and the decisions taken that had an impact on their efficacy. What was needed was much closer supervision, Gordhan said.
The department would be demanding much more frequent reports in key areas of the business so that where malfeasance is creeping in, the department could intervene more quickly rather than only doing so months after decisions had been taken.
A well-equipped monitoring and risk unit with the capacity to understand what was going on in these companies would be created within the department.
Gordhan said among the things he had discovered since his assumption of office is a culture in SOEs where management was independent and autonomous from the state. This weakened accountability to the boards, to the public, the department and institutions, such as Parliament. It was necessary, the minister said, to institutionalise accountability and transparency and ensure the findings of forensic reports were implemented.
There was also a tendency towards recklessness on the part of management on the understanding that the state was always there to bail out the companies when they performed poorly and ran out of money. He said the management of these SOEs had been seriously compromised as a result of the appointment of compliant boards and management teams that worked together.
Gordhan said a permanent board would be appointed shortly at Denel and a serious examination would be made of the management team. Work was also underway at South African Express where malfeasance had been uncovered.
Forensic auditors would be appointed to investigate the affairs of state-owned diamond company Alexkor, as it appeared that the Guptas were involved in the company as well.
According to Gordhan, the department would also be looking at preventing accounting and advisory firms from doing business with SOEs when it was found they had been engaging in corrupt activities with such entities.
Lifestyle audits would also be conducted of top executives of SOEs.
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