Windhoek-Board members at public enterprises could very soon find themselves charged for negligence or acts of recklessness in carrying out the business of the company. Those found to have transgressed the Namibia Companies Act could be prosecuted, fined or slapped with whatever provisions are in the law.
“In cases where reckless trading or gross negligence can be determined, board members will be held personally liable with associated unpleasant consequences,” said public enterprises minister Leon Jooste.
What particularly irks Jooste is the magnitude, time and resources spent on legal fights between board members and executives at public enterprises, while neglecting the management of the institutions.
“I am under the impression that significant amounts of money are spent annually on various legal matters and court cases without a thorough analysis of the cost versus benefit of such cases,” he said.
“We will be utilising the provisions of the Companies Act in cases where [public enterprises] are registered under this law. The accountability of boards as collective and individual board members will enjoy particular attention,” promised the no-nonsense Jooste.
This could become a reality soon when Jooste finalises the legal framework on holding board members accountable. The legal framework is to ensure that boards are accountable for financial losses of public enterprises, particularly in cases where financial losses occurred because “due diligence was not applied or in cases where shareholder advice was ignored”.
Namibia has never previously seen cases where directors of public enterprises are hold accountable specifically over alleged mismanagement of the entities, alleged cases of self-enrichment, and clashed with the line ministry on the rescue plan for the public enterprise. This is true with previous directors of TransNamib who were fingered – although accusations not proven – of having sold company properties to themselves and their close friends at heavily discounted prices.
Also, board members of the Roads Contractor Company (RCC) have clashed with the public enterprises ministry on the best way to turn around the ailing company, going as far as to threaten the ministry with legal actions.
Eventually Cabinet decided last year to place the RCC under judiciary management so as to place a moratorium on debt repayment, and Treasury is currently paying the salaries of RCC employees.
Jooste is emphatic that 2018 will be the year in which he straightens out the prevailing culture of entitlement and introduce a strict adherence to good governance at all public enterprises.
He spoke at the recently ended African corporate governance network conference in Windhoek, where Prof Mervyn King, the chairperson of the King Committee, made a presentation on good governance as driver for sustainable development.
He publicly derided the laissez-faire style management approach among Namibian state-owned enterprises, with boards and executives disregarding good governance principles. This, he says, “results in the big brother syndrome” whereby no responsibility is taken for financial performance since “big brother will always bail us out and will not allow us to go under.”
“We have recently seen an appalling example of how corporate governance failure can lead to potential disaster when a commercial public enterprise approached commercial financial institutions to raise funding only to be turned down due to specific governance failures,” he said.
Jooste also apportions part of the blame on the central government, which so often acts passively in dealing with public enterprises.
He insists there should now be clearly defined roles of the state as a shareholder, the policymaker and legislator, and as a regulator and implementer.
“There must be very clearly defined boundaries between these roles otherwise various structural governance anomalies occur, usually to the detriment of the country,” said Jooste.
He pointed to cases “where the regulator, [the] monopolistic implementer and operator and [the] policymaker [institutions] all resort under one ministry resulting in uncompetitive behaviour by design.”
The emphasis by Jooste comes at a time when there is also the debate over whether or not the existence of Namibia Post Telecom Holdings, the holding company for fixed line operator Telecom Namibia, mobile operator MTC, and Telecom’s mobile operator subsidiary TN Mobile, amounts to a monopoly and anti-competitive behaviour in the market.
Meanwhile, Jooste reiterated that the selection of board members for public enterprises is something that needs urgent addressing. “I am convinced that if we manage to appoint boards with the ideal combination of skills, knowledge, experience and independence, we will solve 80 percent of our problems,” says Jooste.
The appointment of board members would be done through a database that currently has around 600 potential board members, and this would be complemented with advertisements for potential board members to apply. This is because Jooste wants to have not only qualified people as board members, but people with integrity and who would serve the interests of public enterprises and not look for ways to enrich themselves.
He referred to the recent public debate that erupted after the ministry started enforcing the guidelines that board members only meet four times a year, and after that they are to apply for an exemption for a specific period and purpose of the meeting.
He says the outcry is because there are some board members who make a living out of board sitting fees and he elaborated that one public enterprise board met 46 times in one year, resulting in hefty sitting fees for board members.
“And these are not committee meetings, but board meetings,” he says.