As SA drifts towards globalisation, a vibrant SOE sector is crucial to enhance innovative capacity and productivity growth, writes Thabile Wonci
As SA drifts towards globalisation, a vibrant SOE sector is crucial to enhance innovative capacity and productivity growthThe words of University of Johannesburg academic Pádraig Carmody remain true — SA is battling with a compromise between globalisation and social democracy. The economy is rapidly globalising. All this is happening in an era where our economy is in recession, with rising government debt levels and poorly performing and failing state-owned entities .
Critically, tampering with the SOEs can lead to significant economic, social and political consequences. Without doubt SA needs to build a market-driven economy with the SOEs leading the charge. This will only be possible if we bolster the efficiency and competitiveness of the SOEs. Consequently, there must be a proper separation of powers between shareholders and management. This can lead to agency problems, but only if the shareholder and management share different goals. There is an inherent risk that management may abuse their powers for self-gain. This is more pervasive within the SOE environment. This practice requires a well capacitated and independent board of directors and a vigilant shareholder.
The response to the failure of our SOEs is coupled with the failure to take responsibility and a dismal failure to hold those in charge to account. To remedy this situation our SOEs require well capacitated and independent boards motivated by good corporate governance principles and with a determination to discharge their duties and responsibilities to high ethical and moral standards.
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