Recently pronouncements by both the Minister responsible for electricity within the national cabinet and the chairperson on the Eskom Board drew to my attention the differences between oversight, governance and management. In both cases they appeared to make statements that in my initial thoughts belonged with management rather than a politician and a board chairperson. It is often a sensitive issue when management is faced with a managerial politician or a board that seeks to take management decisions.
Eskom, in South Africa, is a State owned entity (SOE) (also defined in the the Public Finance Management Act1 as a Major Public entity) that provides almost exclusively the electricity that powers the national grid. Failures at the State utility in large part due to fraud, corruption and poor management as outlined by the ex-CEO Andre De Ruyter in his controversial book, Truth to Power2, have resulted in the prolonged power outages affecting the entire country. Given the fact that the current government faces an election in 2024, it is to an extent understandable that politicians and political appointees, possibly in desperation, would seek to involve themselves in managerial matters. However, it is an action that holds inherent risk for the maintenance of appropriate governance and oversight of an entity such as Eskom. In many ways Eskom’s current woes as outlined in both the Zondo Commission Report into State Capture and De Ruyter’s book are the result of just such blurring of the lines between oversight, governance and management in the past.
Oversight as a term in this context is composed of “over,” meaning above, and “sight,” meaning looking, but not touching3. This means that those responsible for oversight consider process, program or project but do not involve themselves on day-today management. In a South African context, oversight is a mandated function of the legislature, the national parliament, to scrutinise and oversee executive actions of any organ of state, which in this instance would include a State owned entity such as Eskom4.
In South Africa therefore it appears that oversight of a State owned entity such as Eskom is located largely within the parliamentary structures such as standing committees and the national parliament itself. This possibly also places oversight as defined above beyond the responsibilities of members of the National Cabinet such as the Minister appointed with the sole responsibility for electricity or the Minister of Public Enterprises who are accountable to the National Parliament.
Governance or corporate governance refers to the manner in which companies are governed. It identifies who has power and accountability ensuring appropriate decision making processes and controls. Governance is exercised by the board which is responsible for oversight and planning, setting goals and objectives and should refrain from being involved in the daily operation of the company. The board however may take actions for the good of the company in unexpected crisis situations ideally through management structures5.
Eskom as a State owned entity has a sole shareholder and that is the Government, in this case represented by the Minister of Public Enterprises. As the representative of the sole shareholder the Minister appoints the board and its chairperson thereafter delegating further responsibility for the entity to the board. The Eskom board is therefore responsible, as are all boards, to ensure that the interests of the shareholder are protected. The role is however a governance and not a management role other than in exceptional and crisis situations.
Many public entities listed in the PFMA Schedules 2 and 3 exist in South Africa at the various levels of government. Those listed in Schedule 2 are intended to be less dependent on government funding while those listed in Schedule 3 are to a greater or lesser extent dependent on direct funding from government. However, the principles of oversight and governance apply equally to the entities listed in both schedules.
Management which is responsible for the day-to-day operation of the company or entity takes decisions to support and implement the board’s goals. Management makes the routine operational decisions and handles routine operational decisions and administration decisions essential for the smooth functioning of the entity. Other than the senior management, which is appointed by the board, other appointments are made by the management to ensure that the company has the requisite skills and experience to achieve those goals the company goals6.
While the board of directors creates company policies, management is responsible for enforcing company policy and holding employees accountable for their actions. It is important that board directors, including the chairperson, and management remain within their specific and distinct designated functions and that the lines of responsibility are not blurred. Failure to do so will result in confusion and dysfunction in the entity leading to a failure to achieve its objectives and goals.
South Africa is a relatively young democracy with a relatively new political system and a public service that has still to be firmly established as a professional organisation independent from political interference. While, as I indicate in my book7, my appointment as Head of the Free State Department of Health in 1995 was based largely on my then political allegiance, this occurred during the immediate transition from the apartheid regime when it was necessary to ensure the transformation of the existing public service. However, almost 30 years later it is necessary to ensure that what is euphemistically termed cadre deployment comes to an end and that board and management appointments in government, including the various State entities and enterprises, of which Eskom is one, are made on the basis of merit alone. In addition, once those appointments have been made, the incumbents need the assurance that those responsible for oversight and governance will respect the roles of management and understand where their own roles begin and end.
My own experience, some of which is also outlined in my book, ranged from politicians who wish to micromanage at an operational level and those who were quite comfortable to allow management to operate within the policy parameters adopted in the political manifesto on which they were elected. In my experience it requires both an experienced but also strong manager to firmly but tactfully resist a politician who wishes to depart from their oversight and governance role. In instances when management has been unable to do so, it has been to the detriment of the organisation. As examples I would cite the challenges faced by the departments of health in both Gauteng and the Free State provinces, of which I have personal experience during my time as a member of task teams appointed to investigate these challenges.
I experienced a situation as a Schedule 3 public entity board member when a crisis situation required me to assume for the good of the entity some functions that clearly were managerial in nature. Nevertheless I did so on the understanding that doing so would be of short duration and once appropriate management had been appointed, that I would revert to my governance role as a board member. This I did but I must admit that with my extensive management experience that there was always the temptation to assume responsibilities that were not mine, which I had to consciously resist.
Based on the template that I have sketched above, both the Minister and the current Eskom Board chairperson could argue that as Eskom is faced with a crisis situation leading to the escalating power outages affecting the country’s economy but also impacting on every citizen that they are obliged to assume some responsibilities normally falling within the purview of management. That said, the urgency of restoring a strong and independent management team should not be underestimated given the need to return the entity to the principles of oversight and good governance. It is also important that the respective roles of oversight, governance and management are respected in other South African public entities. I would regard this as critical with the envisaged creation of National Health Insurance as the public entity responsible for the delivery of health care to all South Africans.
In writing this post, I acknowledge that I am not an expert in this field but I feel this is a subject worthy of debate and understanding of those outside the corridors of power and influence. I would welcome comments and corrections from those more knowledgeable than myself.
- The Public Finance Management Act Act 1 0f 1999 as amended by Act29 0f 199 Schedules 2 and 3
- Truth to Power My three years inside Eskom Andre De Ruyter penguin Randdon House 2023
- https://www.caaf-fcar.ca/en/oversight-concepts-and-context/what-is-oversight-and-how-does-it-relate-to-governance
- https://www.parliament.gov.za/storage/app/media/oversight-reports/ovac-model.pdf
- https://www.cgi.org.uk/about-us/policy/what-is-corporate-governance#:~:text=Corporate%20governance%20is%20the%20system,accountability%2C%20and%20who%20makes%20decisions
- https://www.boardeffect.com/blog/difference-between-governance-management/
- Walking the Road of Healthcare in South Africa My 40-year Journey Quickfox Publishing 2021
