'Dismal failure': Zondo says executive can't be trusted with SOE appointments

Politicians have failed to ensure that those who are able to do the job are appointed to the boards and senior positions at state-owned enterprises (SOEs) — with devastating consequences.

This is according to part 2 of the state capture commission's findings, which was handed to President Cyril Ramaphosa on Tuesday.

Part 2, volume 2, deals specifically with Denel, but says failures relating to the state-owned arms manufacturer were apparent at other SOEs.

The report says these failures resulted in near — and sometimes full — collapse of SOEs and repeated bailouts.

In the case of Denel, commission chair acting chief justice Raymond Zondo says it went from “highly regarded internationally” to an empty shell in record time.

Between 2011 and 2015 Denel was functioning well under a competent board and group CEO Riaz Saloojee.

However, the board was not retained in 2015 and a new board was appointed. Zondo questioned why then public enterprises minister Lynn Brown didn't retain the board for a second term.

Zondo writes that one of the new board's “first decisions” was to suspend Saloojee, the CFO and the company secretary.

“Consequently, from the second half of the new board's first year in office and the whole of their second year Denel was without these exceptional performers, namely the 2011 board and the group CEO.

“The result in the year that followed tells it all. In media reports Denel is now associated with liquidation and business rescue.”

This rapid collapse resulted in a company “almost on its knees”. But this is not a situation unique to Denel.

The appointment of boards and CEOs of SOEs was “a matter of serious concern” — and the executive " often failed to appoint the right kind of people [in] these positions”.

Among the dodgy appointments were:

• “In SAA ... the executive appointed Dudu Myeni who went on to do serious damage to the national airline”;
• “In Transnet, the executive appointed Mafika Mkhwanazi and other board members in December 2010 who went on to enter into the strangest settlement agreement in regard to a dismissal dispute that had ever been seen ... and they reinstated [Siyabonga] Gama as CEO of [Transnet Freight Rail] in circumstances that even Mkhwanazi conceded made their decision indefensible”;
• “Also at Transnet, the executive appointed Brian Molefe and Siyabonga Gama to the position of Group CEO one after the other and they caused serious damage to Transnet”; and
• “It was the executive who appointed Ben Ngubane as chairperson of the Eskom board after Zola Tsotsi had effectively been expelled by that board, and he went on to allow not only himself, but also his board to be dictated to by the Guptas or their associates ... he and his board did serious damage to Eskom.”

In Denel's case, the appointment of Daniel Mantsha was particularly problematic, as he had “previously been struck off the roll of attorneys for long lists of acts of misconduct”.

Zondo also cites the case of Tom Moyane at the helm of the SA Revenue Service.

“Even though this doesn't relate to an SOE, it was the executive who appointed Moyane as commissioner of Sars and he went on to cause untold damage to Sars, an organisation that was once the envy of other similar organisations internationally,” Zondo writes. 

All of this shows that the country's political decisionmakers can no longer be trusted with such decisions.

“It is clear that the appointment of members of boards of directors of SOEs and senior executives, such as CEOs and CFOs, can no longer be left solely in the hands of politicians, because in the main they have failed to give these SOEs members of boards and CEOs and CFOs of integrity and who have what it takes to lead these institutions successfully.

“They are going down one by one and, often, they depend on bailouts,” Zondo writes.

He recommended that an independent body be established to identify, select and recruit “the right kind of people” to lead these boards and organisations. Zondo says details of this body will be provided in part 3 of the report, which is due before the end of February.

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