News & Press: Media Statements

City of Johannesburg’s recent actions undermine good governance: IoDSA

Friday, 03 February 2023   (3 Comments)

Just days after Mpho Phalaatse was removed as Johannesburg’s mayor, a letter to all municipal entities surfaced on social media, in which the Acting City Manager of Johannesburg instructs the boards of municipal entities to cease holding any “strategic sessions, including the [sic] Board and Sub-Committee meetings” until further notice. Boards may seek permission to hold meetings to consider any critical reports. All strategic and programme management decisions are specifically placed in abeyance, and any decisions taken since September 2022 are also put on ice.

“If this letter is indeed legitimate, it’s hard not to see this move as a departure from good governance. The content of the letter also raises once again all the accountability issues that the IoDSA has consistently highlighted in relation to state- and municipality-owned entities,” says Parmi Natesan, CEO, Institute of Directors in South Africa (IoDSA). “The shareholder may appoint the boards of these entities, but once appointed these boards have a legal duty to fulfil their obligations as set out in the relevant legislation and in the King Report, and to act in the best interests of the entity.”

The IoDSA has repeatedly pointed out that many of the issues that plague state- and municipality-owned entities can be traced back to the improper exercise of power by the shareholder. By usurping what should properly be the functions of the board, the shareholder makes it impossible for the board to be held accountable, or for the board to hold management accountable.

“Boards are supposed to act independently, but this letter clearly demonstrates that, in the City of Johannesburg at least, they are being prevented from doing so,” she says.

Ms Natesan goes on to point out that forbidding the boards of the municipal entities to meet means that they cannot fulfil their duties and exercise oversight properly. “Municipalities are commonly known for lack of service delivery, as well as fruitless and wasteful expenditure, so preventing boards and audit committees, from meeting and thus exercising oversight, will potentially open the door to even more of the same,” she comments.

It is questionable whether any appointed board can be prevented from discharging its legal duties. Time will tell whether such action will stand up to scrutiny and legal challenge.

“King IV makes it clear that boards should hold as many meetings as necessary to discharge their obligations, so presumably they cannot be prevented from doing that,” she concludes. “This gross interference in the board’s exercise of its governance function is a terrible way for the City’s new administration to begin. The IoDSA urges the new mayor and his executive to take speedy action to confirm their adherence to the principles of good governance as outlined in the legislation and King IV.”

Comments...

Moerane M. Maimane says...
Posted Monday, 03 April 2023
I agree with the article, however this is water under the bridge. The municipal entities are highly politicised and there is very little that can be done. They are seen as extensions of the municipality which should not be the case.
Lwazi Kubheka says...
Posted Monday, 20 February 2023
I'm in full agreement with the position the article has taken. However, can this ever work in the political environment? Municipal entities are just an extension of a municipality, which is a highly political entity by nature. If these are political extensions therefore, it follows that they would be vehicles through-which the party in control gets to implement its policies. These policies are in the best interest of the electorate and/or the people of SA, and not the legal entity. With the above understanding, it follows that the incoming political party would always halt programs of the previous party, which in this case also includes board activities. Quite right in the article, this does hamper service delivery, and is also departure from good governance for a company. I initially wanted to say, context matters, but retracted, and am wondering whether municipal entities should even be registered as companies with boards in the first place. Just a thought
Michiel Heyns says...
Posted Friday, 17 February 2023
This is well said, and I agree fully. Strategy, and the institutionalization of a jointly formulated strategy based on good business principles is essential for success.