An analysis of the effectiveness of section 76 of the companies act 71 of 2008 in ensuring the successful management of State-Owned Companies in South Africa
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Authors
Motlhoiwa, Neo Cornelius
Issue Date
2024-04
Type
Dissertation
Language
en
Keywords
Alternative Title
Abstract
The statutory standards found in section 76 of the Companies Act 71 of 2008 (the Companies Act) are meant to be preventative and to deter directors from acting in their own interests in their management of companies. However, notwithstanding the imposition of these standards, South Africa has seen several directors in its State-Owned Companies (SOCs) failing to act accordingly in the performance of their duties, and this has led to the mismanagement of these SOCs. In light thereof, this study investigates the extent to which section 76 of the Companies Act is effective in ensuring the successful management of SOCs in South Africa and to determine what can be done to address any inefficiencies in the provision or factors diminishing its effectiveness. As part of this study, a comparative analysis of the State-Owned Enterprise (SOE) governance regime in Singapore is undertaken, as the nation is highly regarded for its SOE governance. Accordingly, the objective of this comparative analysis is draw lessons from Singapore.
The importance of this study lies in the fact that SOCs play a major role in both the economy of South Africa and the lives of ordinary South Africans. Therefore, their successful management will enable SOCs to contribute to the economic growth of the country and better the lives of ordinary South Africans. Further, the South African government has to continuously draw billions of rands from state coffers and issue bailouts to some collapsing SOCs to prevent them from absolute failure. Therefore, the successful management of SOCs will also allow the government to redirect funds which it would have used for further bailouts to more constructive matters.
This study found that section 76 of the Companies Act is not effective in ensuring the successful management of SOCs and determined that what is hindering the success of this provision is the quality of board members appointed in SOCs and their lack of independence. To remedy this issue, this study recommends amendments to the Companies Act relating to the appointment process of SOC board members and the transparency of this process, to promote direct public participation.