The extent to which the fiduciary duties and liabilities of directors of state-owned companies facilitate good corporate governance in South Africa

Abstract

Background: The legislative and policy framework governing the sector for State-Owned Entities (SOE’s) in South Africa is criticised for being legally fragmented, in addition to other governance concerns in the sector, such as financial and operational concerns. In recent years, South African State-Owned Companies (SOCs) have experienced a constant decline in their governance and delivery of public goods. Efforts by these companies to effectively respond to the socio-economic development of the State remains constrained as a result of many factors, including the legal framework governing the sector. SOCs are defined as companies established by the state for the purpose of partaking in commercial activities on behalf of the government. The Organisation for Economic Development (OECD), defines these entities as ‘any corporate entity recognised by national law as an enterprise and in which the state exercises ownership.’ SOCs are founded in different statutes - and have various objectives, including socio-political, commercial, or dual objectives. For the purpose of this paper, the term ‘state-owned companies’ (SOCs) will be used, as the paper reflects on corporate governance through the lens of the Companies Act 71 of 2008 (Companies Act). SOCs are the principal drivers of the formal sector of the economy as they are the providers of the bulk of the State’s economic growth. They are the biggest employers in the economy, and they play a vital role in the provision of social services such as infrastructure, utilities, transport, energy, telecommunications, and finance.