In its final report, the Judicial Commission of Inquiry into State Capture (Zondo Commission) recommends the enactment of legislation to establish a professional body for public procurement officials.[1] While there is no doubt this is a good move, the Institute of Directors in South Africa wishes to express its disappointment that its recommendation for a similar enforced body for directors was not acted on.
​
“We wrote to the Commission in September 2021 setting out the compelling reasons to recommend the establishment of a statutory professional body for directors. By not doing so, we believe that the Commission missed a historic opportunity to alter fundamentally the governance landscape of the country for the better,” says Parmi Natesan, CEO: IoDSA.

“The Commission’s reports uncover all too clearly the massive damage that incompetent and unethical directors can wreak, and the smoking ruins of our vital state-owned enterprises are visible all around us.”

A mandatory professional body for directors would have the benefit of requiring that directors would have to keep their skills updated via a rigorous process of continuous professional development. The professional body would also be able to keep its members abreast of developments in governance best practice.

Equally important, members of such a professional body would be bound by a code of conduct, in terms of which they could be rapidly disciplined and even have their membership terminated. Termination could in turn signal to the market to not appoint them as a director.

“As we now contemplate the possibility of years of litigation to bring the main actors in state capture to book, establishing a mechanism through which unethical or incompetent directors could be swiftly and relatively inexpensively held to account looks very attractive,” she observes.

The IoDSA further argues that alongside a statutory professional body for directors, there should be enforcement of formal director designations registered with the South African Qualifications Authority (SAQA). Such formal designations would provide a way to ensure that directors have the necessary competencies to serve as a director based on rigorous testing against a formal competency framework. Designation holders who fail to keep their skills updated in line with the CPD framework would have their designations removed, reducing their attractiveness to companies.

The IoDSA already owns and awards two SAQA-recognised director designations—Certified Director (SA) and Chartered Director (SA).

“Directorship is now a serious profession that requires individuals to possess a definite set of skills and competencies, and the ability to provide strong leadership based on sound ethical principles,” Ms Natesan concludes. “While this was not covered in the Commission’s final recommendations, the IoDSA will continue to lobby for directorship to become a regulated profession, providing both the public and private sectors with a growing pool of properly qualified individuals who have committed to ethical leadership and have signed on to a solid code of conduct.”

ENDS

MEDIA CONTACT: Stephné du Toit, stephne@thatpoint.co.za, 084 587 9933, www.atthatpoint.co.za
For more information on the IoDSA please visit:
Website:  www.iodsa.co.za
Twitter:  @The_IoDSA
LinkedIn:  Institute of Directors in South Africa Company Page  
Facebook: Institute of Directors South Africa

[1] Judicial Commission of Inquiry into Allegations of Capture, Corruption and Fraud in the Public Sector Including Organs of State, Report: Part VI, Volume 4: Summary of Recommendations, 62, p24, available at www.statecapture.org.za/site/files/announcements/672/OCR_version_-_State_Capture_Commission_Report_Part_VI_Vol_IV_-_Recommendations.pdf. 

The Institute of Directors in South Africa (IoDSA) broadly welcomes the recommendation to establish a Standing Appointment and Oversight Committee to strengthen the process of nominating and appointing directors of state-owned enterprises. The recommendation was made in the final volume of the report of the Judicial Commission of Inquiry into State Capture (Zondo Commission).[1]
​
“We are totally in agreement with the Zondo Commission’s statement that appointments to the boards of state-owned enterprises (SOEs) must be ‘justifiable based on their skills, expertise, experience and knowledge’[2], and that the state, through the responsible ministers, has signally failed to appoint the ‘right kind of people’[3] to the boards of SOEs,” says Parmi Natesan, CEO, IoDSA. “This is an issue that the IoDSA has repeatedly raised, and which is covered in King IV. The notion that board members should be appointed based on the needs of the organisation is revolutionary in the South African context, where political appointments have effectively collapsed the public sector.”

Principle 7 of King IV states that: The governing body should comprise the appropriate balance of knowledge, skills, experience, diversity and independence for it to discharge its governance role and responsibilities objectively and effectively. This goal is particularly hard to attain for SOEs because the state, as the sole shareholder, has the power to make appointments unilaterally. In the sector supplement for SOEs, King IV advises SOEs and executive authority to collaborate in the nomination process and to make it transparent.

King IV requires the nomination of any board candidate to take into account the needs of the governing body in terms of skills, knowledge and experience, the governing body’s diversity, and whether the candidate meets the “appropriate fit and proper criteria”.[4]

Ms Natesan argues that these criteria should include the IoDSA’s Director Competency Framework.[5]

Given the reality that the state has power that shareholders in the private sector do not, the Zondo Commission’s recommendation that a committee be set up to govern the process of nominating and electing SOE board members is a good one. In fact, in a letter to the Commission in September 2021, the IoDSA recommended the establishment of a consistent and transparent nominations process that included a nominating panel comprising representatives of appropriate stakeholder interests.

“The Commission’s recommendation is actually much stronger because it seemingly envisages that the proposed committee would have the power to control the nomination process even against the wishes of the executive in order to secure the future of the SOE,” Ms Natesan says. “Our only disappointment is that the list of persons to serve on the oversight committee does not include a representative of the IoDSA, preferably somebody who holds one of our SAQA-registered directorship designations and who would be in a position to provide expert input on the directorship role and the competencies required.”

ENDS

[1] Judicial Commission of Inquiry into Allegations of Capture, Corruption and Fraud in the Public Sector Including Organs of State, Report: Part VI, Volume 4: Summary of Recommendations 247, p 181, available at www.statecapture.org.za/site/files/announcements/672/OCR_version_-_State_Capture_Commission_Report_Part_VI_Vol_IV_-_Recommendations.pdf.
[2] Ibid 6, p 2.
[3] Ibid 112, p 41.
[4] IoDSA, Report on Corporate Governance for South Africa 2016, p 15, available at https://www.iodsa.co.za/page/king-iv.
[5] Available at www.iodsa.co.za/resource/collection/56E77A6D-56E7-46EF-86EF-B425DD00EA9B/Director_Competency_Framework.pdf.


MEDIA CONTACT: Stephné du Toit, stephne@thatpoint.co.za, 084 587 9933, www.atthatpoint.co.za

For more information on the IoDSA please visit:
Website:  www.iodsa.co.za
Twitter:  @The_IoDSA
LinkedIn:  Institute of Directors in South Africa Company Page  
Facebook: Institute of Directors South Africa

The recent report on local government by the Auditor General, Tsakani Maluleke, is a timely reminder of the prevailing dysfunction in municipalities across the country, and the catastrophic impact that is having on all South Africans. The Auditor General is right to lay the blame squarely on the shoulders of municipal leaders, says Parmi Natesan, CEO, Institute of Directors in South Africa (IoDSA)—but perhaps we also need to be talking about professionalising municipal management as well.
 
“There’s a reason that King IV’s first principle concerns leadership because ultimately everything stems from what goes on at the board or council. Principle 1 speaks to the absolute need for ethical leadership, while Principle 10 deals with the imperative to delegate the council’s authority to a competent municipal manager on whom it can rely,” she argues.
 
“King IV’s sector report on municipalities further recommends that councils ensure they have access to ‘professional and independent guidance on corporate governance and its legal duties’ (King IV, p 85).”
 
The theme of the Auditor General’s Consolidated General Report is “Capable leaders should demonstrate change by strengthening transparency and accountability”.
 
The corollary is that we have now to ask whether municipal councils and audit committees have the right leadership of ethical and effective leaders.
 
What criteria are used to appoint municipal councillors and do we know precisely what competencies they need to have in order to discharge their duties properly? she asks, noting that, as the Auditor General pointed out in her report, senior municipal management has been dilatory at best in implementing the detailed recommendations contained in previous reports.
 
Ms Natesan concurs, saying that this state of affairs seems to be the result of decades of incompetence and even criminal behaviour. “However, as noted, the buck stops with the municipal council. Councils are gravely at fault because they do not hold senior management to account for how they fulfil their duties, and they should, in turn, be held accountable,” she says. 
 
Constitutionally, the national and provincial governments are bound to assist in strengthening and supporting municipalities to operate effectively (Constitution of the Republic of South Africa, 1996, s154(1)). Section 139 sets out how, in extreme cases, provincial governments can intervene in local government.
 
But, says, Ms Natesan: “Given that these interventions do not necessarily seem to solve the problem, not least because everything is so politicised, are we now not overdue in simply professionalising local government? Municipalities are where most of the really important service delivery actually occurs—or doesn’t occur. As we seem to be entering a period of unstable municipal coalitions that could make the council’s leadership role even less effective, building up a cadre of professional municipal officials who have current and relevant skills, and who can be held to account rapidly via a professional code of conduct might something to seriously consider at this point.”
 
ENDS

MEDIA CONTACT: Stephné du Toit, stephne@thatpoint.co.za, 084 587 9933, www.atthatpoint.co.za
 
For more information on the IoDSA please visit:
Website:  www.iodsa.co.za
Twitter:  @The_IoDSA
LinkedIn:  Institute of Directors in South Africa Company Page  
Facebook: Institute of Directors South Africa

In detailing some of the crimes and misdemeanours that enabled state capture, the Zondo Commission’s report is in fact offering office-bearers across business and society a morality tale. In this spirit, the assessment of the performance of the erstwhile Chair of South African Airways, Dudu Myeni, acts as a case study of how important the role of the Board Chair is, and how not to do the job, argues Parmi Natesan, CEO of the Institute of Directors in South Africa (IoDSA).
 
“Myeni’s tenure as Chair of SAA should be seen as an object lesson that all current and future Board Chairs should take to heart,” she says. “The one constructive thing that can come out of this shameful episode in corporate life is to understand how things can go so wrong.”
 
Natesan says that key lessons can be drawn from the Zondo Commission’s report on Myeni’s tenure as Chair:
 
Criteria and process are critical for the appointment of leadership positions on boards. The Report states that Myeni was appointed as Chair despite being an underperforming director. All board members, and particularly the Chair, need to be appointed in terms of rigorous criteria. “The IoDSA maintains that the primary role of the Chair is to lead the Board and set its tone, which in turn sets the tone for the whole organisation,” she notes. “Political connections are wholly irrelevant when it comes to ascertaining an individual’s fitness to serve in this critical leadership position.
 
“It’s clear that SAA suffered from the same problem as other state-owned enterprises—undue political interference not only in the appointment of senior leaders but also in bypassing basic governance such as, in this case, holding the Chair to account.”
 
As the Report makes clear, there were several attempts by the Board to seek redress on Myeni’s performance, but they came to nothing because she was protected by the political establishment.
 
The Chair must have the respect of the rest of the Board. Without a proper voting process, it is unlikely that the Chair would have the Board’s respect and support, and he or she would thus be ineffective as a leader.
 
As the Report makes clear, Myeni ruled by creating a climate of fear and suspicion that discouraged other Board members and executives from raising the alarm. In such a case, clearly, the Board was effectively dysfunctional and thus wrong decisions were repeatedly taken.
 
Chairs must understand and fulfil their role. The Report makes the point that Myeni overstepped her mandate as Chair. In particular, she made a “series of operational choices at SAA that saw it decline into a shambolic state”.
 
The first point to make is that Boards, and their Chairs particularly, are not supposed to involve themselves in operational matters, which are the preserve of management. The Chair’s role is strategic, and primarily involves ensuring that the Board functions optimally in fulfilling its oversight role.
 
“This section of the Zondo Commission Report graphically illustrates how important the Chair is as the apex of governance within any organisation, and thus how destructive an ineffective or downright malign Chair can be,” Natesan concludes.

ENDS

MEDIA CONTACT: Idéle Prinsloo, idele@thatpoint.co.za, 084 587 9933, www.atthatpoint.co.za
 
For more information on the IoDSA please visit:
Website:  www.iodsa.co.za
Twitter:  @The_IoDSA
LinkedIn:  Institute of Directors South Africa Company Page 
Facebook: Institute of Directors South Africa

“Acting Chief Justice Zondo’s State Capture Commission report highlights the need for formal regulation of the director profession,” says Advocate Fay Mukaddam, Chartered Director (SA) and Governance Specialist at the Institute of Directors South Africa (IoDSA).
 
As examples, Mukaddam points to the first volume’s allegations of gross mismanagement at SAA and its chairperson at the time eventually being declared a delinquent director by the courts.
 
“While legal action can be taken to prohibit an incompetent or criminal director from serving on any boards in the future, this is effectively closing the stable door after the horse has bolted,” she says, insisting that early prevention is better than eventual punishment.
 
A flawed system
What stands out in the report is cadre deployment that saw people appointed to boards in SOEs and public sector entities because of their political connections rather than their fitness as directors.
 
It is evident that they often did not understand or respect their mandate and either neglected or ignored their obligation to the organisation and the law. As a result, they allowed poor performance to infect the corporate culture they were meant to heal and led their organisation to ruin.
 
This signals a flawed recruitment, screening, selection and appointment process and a lack of appreciation for what the roles and responsibilities of a director and board are.
 
"If one doesn't understand what they are elected to do, how can they acquit themselves of their fiduciary duties?" asks Mukaddam.
 
It also appears that, due to their questionable appointment, they were not subjected to the same performance interventions or rehabilitation processes as everyone else.
 
The impact of poor directors
SAA is a prime example of what happens when even a few poor directors are appointed to boards.
 
Unfortunately, director acumen and commitment to their duties vary widely across organisations in both the public and private sectors, and low performance can go unnoticed until it is too late.
 
“Professional directors as a collective have a significant impact on the economy, yet almost anyone can become a director without possessing the level of competency essential to their office,” says Mukaddam.
 
The vetting process is largely left to the incumbent board or the vote of the organisation’s shareholders.
 
Mukaddam suggests that this process is unsustainable, especially in developing countries like South Africa where robust policy is critical to economic recovery.
 
A better approach
“It is long past due that an independent regulator is empowered to accredit incoming directors against global professional standards, hold them accountable for misconduct, and formalise their continuous professional development on pain of being disqualified,” states Mukaddam.
 
Other significant professionals, like doctors, auditors or attorneys, are required to pass a bar exam or professional evaluation before being allowed to practice. They are also subject to the disciplinary oversight of their professional body and must commit themselves to monitored lifelong learning.
 
Yet none hold more sway over their nation’s prosperity than public and private professional directors.
 
“A regulator, supported by government and the private sector, is far more effective than a long and difficult legal battle for a delinquency judgement after an organisation is already crippled,” says Mukaddam.
 
 
ENDS

 
MEDIA CONTACT: Idéle Prinsloo, 082 573 9219, idele@thatpoint.co.za, www.atthatpoint.co.za 
 
For more information on the IoDSA please visit:
Website:  www.iodsa.co.za
Twitter:  @The_IoDSA
LinkedIn:  Institute of Directors South Africa Company Page  
Facebook: Institute of Directors South Africa

Conclusions and recommendations made in part one of the state capture inquiry report align closely to a letter sent by the Institute of Directors South Africa (IoDSA) to the Zondo Commission in September 2021. The letter included recommendations on director competencies as well as the nomination and selection of directors.
 
Section 580 of the state capture inquiry report mentions that the appointment of board members to SOEs “has proven to be problematic and does not represent the “robust and transparent” process recommended by King IV”. It also highlights the common “disjuncture between the fiduciary duties of SOE board members and the profile, skills and expertise of incumbents”.
 
Section 582 and 583 further explain why “the national interest demands that state owned enterprises operate under efficient and professional leadership which requires that the appointment procedure is transparent, not driven by party political interests but made in accordance with objective criteria”.
 
King IV makes a few important recommendations relating to the governance of the nomination
process. The first of these is Recommended Practice 15: “the processes for nomination, election and ultimately, the appointment of members to the governing body should be formal and transparent”.
 
Recommended Practice 16 states that “before nominating a candidate for election, the governing body should consider the collective knowledge, skills and experience required by the governing body, the diversity of the governing body, and whether the candidate meets the appropriate fit and proper criteria”.
 
“While we welcome the alignment between the conclusions of the report and what the IoDSA has been saying for years, we are anxious to see the implementation of the recommendation on the professionalisation of directors,” says Parmi Natesan, CEO of the IoDSA.
 
Professionalising directorship will not automatically eliminate incompetent or corrupt directors any more than professionalising medicine or engineering achieved that goal. It will, however, provide an objective framework for ensuring that directors have the required skills in terms of an objective competency framework, and that they can be disciplined in terms of a professional Code of Conduct.
 
Alongside the professional skills a modern director needs, it is vital that individuals who serve as directors possess the necessary personal qualities. Directors should above all be ethical, independent and courageous. Courage and independence are particularly necessary because directors must put the interests of the organisation first, and this may mean going against the interests of the parties which appointed them or, indeed, their own interests.
 
“Our highly respected director development programmes, Certified Director (SA) and Chartered Director (SA) designations, and governance advisory services are available immediately to support the implementation of the recommendations made by the Commission,” says Natesan.
 
ENDS

MEDIA CONTACT: Idéle Prinsloo, 082 573 9219, idele@atthatpoint.co.za, www.atthatpoint.co.za
 
For more information on the IoDSA please visit:
Website: https://www.iodsa.co.za/
Twitter: https://twitter.com/the_iodsa
LinkedIn: https://www.linkedin.com/company/institute-of-directors-in-southern-africa
Facebook: https://www.facebook.com/TheIoDSA

More laws and regulations are not going to solve the many problems business—and the country—face. Only changed behaviour will do that.
​
Authored by Parmi Natesan, CEO, Institute of Directors in South Africa (IoDSA)
 
Reading through the proposed amendments to the Companies Act again, it struck me that they are symptomatic of a general South African problem: too much regulation, too few results. No doubt some of these amendments are necessary, but will they actually address the big issues that concern us all?
 
It’s doubtful. We already have a huge legal superstructure, and yet corruption, corporate wrongdoing and all sorts of other shenanigans continue to dominate the headlines.
 
Rules are obviously important. But no matter how well drafted or necessary, they will not be effective if they are out of sync with the surrounding culture, and if they are not implemented by people with the right skills and attitude, with visible consequences for transgressions.
 
In addition, if there are too many onerous laws and regulations then businesses (and citizens, in the end) begin to find them burdensome and turn either to mindless compliance or outright circumvention.
 
One example that will prove my point is the proposal to mandate the disclosure of pay gaps between the highest and lowest earners. The intent—addressing the social inequality prevalent in the country—is certainly necessary, but this is a complex issue not solvable simply by a set of rules.
 
One might argue that if the wage gap is the outcome of a faulty economic system, then fixing it requires the fundamentals to be addressed—simply disclosing the wage gap in isolation is futile. Disclosure needs to be complemented by policy change and a mechanism for monitoring how the gap has changed over time. We also need to agree that a wage gap will always exist, but what the parameters of an acceptable wage gap look like.
 
As it now stands, the current proposals risk a slew of unintended consequences. One is the real possibility that they would simply speed up the brain drain as top executives move to jurisdictions where earning high rewards is less complicated or threatened. The proposals could also prompt companies to restrict the hiring of junior employees and outsource lower paid employees in order to improve the gap between highest and lowest paid. Some companies could even relocate to avoid rules that are perceived to make doing business more difficult. Losing companies and executives, not to mention jobs and taxpayers, would surely be an unintended—and highly negative—consequence. 
 
One final point that needs to be made. With the latest official unemployment figures standing at 34.9%, focusing on the wage gap seems a little unbalanced given that a third of our people are without any job at all.
 
Changing hearts and minds
The phenomenon of overregulation is widely recognised as something that needs to be solved. President Ramaphosa has set a target for South Africa to better its ranking in the World Bank’s Ease of Doing Business Index, from 82 to 50.
 
Part of the solution is surely to cure our addiction to solving problems by making new laws, and rather find ways to change how organisations and the people within them think and behave.
 
Corporate governance codes provide a useful example of an alternate approach. Having started off with a somewhat compliance-based approach, the King Reports on Corporate Governance have mutated into something quite different: King IV has moved decisively from being a set of “rules” that ought to be complied with (often while circumventing the spirit of the rule) to a set of outcomes that are aspirational.
 
In parallel, the emphasis has shifted to requiring an explanation of which recommended practices have been applied in order to achieve each principle, and away from the simple implementation of static requirements.
 
Substance over form, in other words.
 
King IV thus ultimately aims to change the culture of the organisation, and how it does business. We are not there yet, of course, but if stakeholders and the overall social context demand it, it will happen. A prerequisite will be that corporate and government leaders begin to embody a culture based on ethical and effective leadership that in the end supersedes the “rules”.
 
The importance of the outcomes-based approach embodied in King IV can hardly be overstated. One of its main advantages is that it is non-prescriptive and flexible, allowing organisations latitude in how they go about applying the code’s principles so long as they explain what their thinking was and what progress they have made. Unfortunately, since its launch, we have not seen disclosure with the depth intended by the Report.
 
To conclude, I want to emphasise that a solid body of good laws remains an essential foundation for a vibrant economy and a just society, but it cannot succeed unless the surrounding culture also changes. Instead of putting more laws on the statute books, government should be focused on making it easier to do business and supporting efforts to change the culture that pervades business, and the nation at large. Absent that, we will not address the real issues—inequality, financial inclusion, environmental stewardship and so on—while risking a further contraction of the economy with everything that would entail.

ENDS

MEDIA CONTACT: Idéle Prinsloo, 082 573 9219, idele@atthatpoint.co.za, www.atthatpoint.co.za
 
For more information on the IoDSA please visit:
Website:  www.iodsa.co.za
Twitter:  @The_IoDSA
LinkedIn:  Institute of Directors in Southern Africa Company Page  

The decision by the board of Absa to remove Sipho Pityana has provoked an enormous amount of controversy and a great deal of debate. Parmi Natesan, CEO of the Institute of Directors in South Africa (IoDSA) says that the public needs to ensure it understands the law relating to the removal of a director, but that it also takes into account the complexities of the decision process the board would have undertaken.
 
“The legality of Mr Pityana’s removal from the Absa board will be decided in reference to the stipulations of the Companies Act, which provides the conditions under which such an action may be taken,” she says.
 
In terms of the Companies Act, there are two ways to remove a director. One is for the shareholders of the company to adopt an ordinary resolution at a shareholders’ meeting. The persons entitled to exercise voting rights in the election of a director would be eligible to vote in this matter.
 
Alternatively, as was the case in this instance, the board can remove a director via a board resolution if a director or shareholder has alleged that the said director has become ineligible or disqualified from sitting on the board; is so incapacitated that he or she cannot perform directorial functions and is unlikely to regain that capacity within a reasonable time; or has neglected or been derelict in performing his or her directorial functions.
 
In both cases, the affected director needs to be given notice of the meeting and the content of the resolution, as well as reasonable opportunity to make a presentation prior to the vote taking place.
 
“We live in the Age of Social Media, and we are often quick to form and then voice strong opinions. In this instance, the Companies Act lays down the framework under which a director may be removed from office; and there is a due process to be followed,” she says. “In addition, even after the decision, the director concerned has the right to apply within 20 business days to a court to review the determination of the board.”
 
We will now wait and see how this further legal process unfolds. This is a highly complex case, with many issues to be taken into consideration. One thing is clear though—boards have to take tough decisions if they believe it is in the best interests of the company, while staying within the lines of the law. Whether this was the case is a matter for the experts to decide, and we should let them do so.
 
ENDS
 
MEDIA CONTACT: Idéle Prinsloo, 082 573 9219, idele@atthatpoint.co.za, www.atthatpoint.co.za
 
For more information on the IoDSA please visit:
Website:  www.iodsa.co.za
Twitter:  @The_IoDSA
LinkedIn:  Institute of Directors in Southern Africa Company Page  

Johannesburg - A strong unequivocal commitment to fiscal sustainability announced by the Finance Minister in his Medium-Term Budget statement is to be welcomed, but the decisive test is always seeing words put into action and for government not to waver from its stated path.
 
The Institute of Directors South Africa (IoDSA) says boardrooms around the country should welcome Minister Enoch Godongwana’s sentiments on long-term growth, narrowing the budget deficit and stabilising the worrying trend of rising debt.
 
Notes IoDSA, CEO Parmi Natesan, “In order for business to thrive in South Africa and confidence to increase, strong messages like this assist and go a long way to restoring confidence. However, promises without swift action are hollow and we now look forward to seeing how government plans to deal with the debt issue that remains at worryingly elevated levels. We are also buoyed by the Minister’s concerns over unemployment but again we need to see more detail on the solve.”
 
Natesan says a call for faster implementation of structural reforms to unlock greater private sector investment, economic growth and job creation is also a welcome move, particularly when it comes to private sector participation.
 
“Our members tell us their companies are prepared to act and participate more robustly if over-regulation and red tape are reduced which would then create a smoother and more efficient operating environment.”
 
Natesan says a critical aspect of big infrastructure spend is fiscal accountability.
 
“Big capital projects always carry high potential for fraud and malfeasance. Now more than ever we need the right governance protocols in place and then implemented without fear or favour to make sure allocated funding is responsibly managed and accounted for.”
 
ENDS

MEDIA CONTACT: Idéle Prinsloo, 082 573 9219, idele@thatpoint.co.za,  www.atthatpoint.co.za
For more information on the IoDSA please visit:
Website:  www.iodsa.co.za
Twitter:  @The_IoDSA
LinkedIn:  Institute of Directors in South Africa Company Page  

THE upcoming local government elections are unquestionably one of the most important in South Africa’s recent democratic history and the Institute of Directors South Africa (IoDSA) joins a widespread call to urge voters to turn out in their numbers.

The Institute’s CEO Parmi Natesan says, “There is sufficient evidence to suggest that many municipalities in South Africa are either failing or close to a state of complete collapse. Poor service delivery has a direct impact on jobs and sustained growth and its only through the ballot box that people can make their dissatisfaction heard and to effect change where necessary.”  From a governance perspective, the voters are, after all, key stakeholders in these entities and thus need to hold the leadership to account.

According to the office of the Auditor General, less than 40 of the country’s 278 municipalities are said to be on a sound financial footing and should this trendline continue the risk to investment will continue unabated as well as putting increasing strain on the national fiscus as well as South Africa’s sovereign risk.

Fay Mukaddam, a governance specialist with the IoDSA notes, “There is no doubt that the country has reached another growth and development crossroads and failure to get local government moving in the right direction will have negative consequences for years to come.  And it’s at this level where the crisis is most pronounced.  If a municipality is unable to effectively offer the most basic of services, there is an immediate negative sentiment created and this has rapid knock-on effect on the creation of new jobs.”

A case in point says the IoDSA was the recent case of dairy company Clover’s decision to relocate its cheese factory from the town of Lichtenburg in the Ditsobotla Municipality due to poor service delivery for number of years. Over 400 – permanent and temporary - jobs were lost which could have been saved had there been more attention focussed on basic issues like garbage disposal and road maintenance.

The Institute says for business to remain focussed and competitive; it must have a constant symbiotic and trusting relationship with local government and part of the compact is making sure a sustainable operating environment is delivered all year round.

Mukaddam says while the Clover example was a high-profile and well documented issue, there are many other businesses in South Africa that are experiencing similar frustrations and that the November 1 election can be a time for businesses to send a clear and unambiguous message to failing municipalities that they have run out of runway.

The IoDSA says it also acknowledges that poor service delivery and inefficient municipalities cannot be an overnight fix and that current problems are in many cases historical. Part of the dilemma according to the Bureau for Economic Research at Stellenbosch University lies with mangers and staff who often lack technical insight; and in the way that tender specifications are drawn up. An additional problem is that many smaller and poorer municipalities do not have a proper tax base.

Natesan concludes, “We acknowledge these are deep-rooted problems which result daily in poor management of operational budgets; a failure in many cases to spend capital budgets as well as wasteful and irregular expenditure. And while change might occur at the political level, that doesn’t mean that problems like this will disappear immediately. There is also a vital need for functional and effective change at the governance and administrative level but that the November 1 poll is the starting point.”

ENDS

MEDIA CONTACT: Idéle Prinsloo, 082 573 9219, idele@thatpoint.co.za,  www.atthatpoint.co.za
For more information on the IoDSA please visit:
Website:  www.iodsa.co.za
Twitter:  @The_IoDSA
LinkedIn:  Institute of Directors in South Africa Company Page