The Ministry of Public Enterprises (MPE) will launch the Public Enterprises Compliance Project on Monday, May 16 to ensure that public enterprises achieve full compliance with various legislative and statutory provisions. According to Minister of Public Enterprises Leon Jooste, the process is expected to be concluded within a two to three month period. A situational analysis, embarked upon after the establishment of the ministry last year, uncovered numerous cases of non-compliance of certain State-owned enterprises (SOEs).
“Each of the 97 public enterprises will be visited individually by a team from the ministry led by either the minister or the deputy minister (or both). The opportunity will be used to share the concerns of the ministry and particular elements of non-compliance will be discussed and appropriate remedial actions agreed upon. We will require each public enterprise to commit to an agreed timeframe to rectify the items and Boards will be held accountable to these timelines,” said Jooste in a statement issued on Wednesday.
Some the main items to be discussed will be performance and governance agreements between Boards and line ministries, strategic plans, annual business and financial plans, which have to be submitted 90 days before the end of financial year-ends, annual reports which must be submitted within six months after the end of each financial year, and other governance-related matters.
Jooste said the situational analysis of public enterprises is ongoing and is being conducted in phases. He expects more critical issues to be uncovered in the deeper layers of the diagnostic process. “One of the performance indicators in the Ministerial Performance Contract is to ensure that the public enterprises reach a status of full compliance. Previous attempts to ‘inspire’ public enterprises to attend to items of non-compliance yielded marginal results and the ministry has decided to commit to a dedicated project to address this matter without delay.”
He continued that the launch of the compliance project will also be used to assess whether SOEs have human resource policies, as well as asset, finance, dividend, remuneration and investment policies in place and whether these are aligned to the directives of the MPE. “All public enterprises will be issued with a new directive to align their procurement policies to the new Public Procurement Act of 2015. The new law makes provision for the inclusion of public enterprises and the alignment of their procurement policies to this Act is of fundamental importance and is another performance indicator, as per Ministerial Performance Contract,” Jooste explained.
He said the motivation for the MPE’s sense of urgency to address non-compliance in public enterprises is based on the principle that each of these items have very specific justification. He emphasised that the purpose is not to merely produce a set of documents to comply with legislative provisions. “Every single policy, agreement, or plan is required to gauge the strategic and economic performance of public enterprises (PEs) and to create transparency in its operations. The MPE will be using these documents to aid the PEs to formulate the most appropriate remedial actions.
“Audited financial statements, for example, are not simply there to expose the financial performance of an entity, but should (and will) be used to expose inefficiencies or shortcomings. The tendency where qualified audit reports are produced year after year will no longer be condoned. The reasons for earning a qualified opinion from auditors will be analysed and the commitment to rectify these will be captured in the performance agreements of Board members and we will make certain that these are equally captured in the performance agreements between the Boards and the CEO/MD,” Jooste said.
One of our major reform strategies for PEs is to introduce a comprehensive performance-based governance system. New remuneration guidelines, which are expected to be finalised soon, will incorporate an incentivised remuneration system where pay rates will be based on performance. Furthermore, clear, quantifiable key performance indicators will be negotiated with Boards, as well as CEOs and managing directors and appropriate performance bonuses will only be allowed once these indicators are achieved.
The indicators will include economic and strategic goals, which is another reason why a state of total compliance is important. Jooste noted the MPE will introduce an electronic performance management and evaluation system, which will be integrated into all PEs. “This system will provide the MPE with various indicators in real-time and will incorporate an early warning system to warn of any potential problem before the problem escalates into a disaster,” Jooste noted.