STATE-OWNED COMPANIES & GOVERNANCE
Rethinking State Ownership & Board Authority
State-owned companies occupy a central role in South Africa’s economic and developmental landscape. Yet persistent governance failures continue to undermine their effectiveness, erode public trust, and place significant strain on public resources. At the heart of these failures lies a structural misalignment between legal authority, accountability, and control.
South Africa’s governance framework for state-owned companies reflects an inherent tension between the Companies Act, which vests authority in the board of directors, and the state as shareholder, often acting through political office-bearers.In practice, this has resulted in blurred lines of accountability. Boards are expected to govern, while shareholder representatives exercise influence, creating an environment in which responsibility is diffused and accountability weakened.
Boards of state-owned companies derive their authority directly from law—not from shareholder delegation. Where this principle is undermined, whether through informal influence or formal intervention, the integrity of the governance framework is compromised.
A central challenge in the current system is the absence of clear accountability at shareholder level. While directors are subject to established fiduciary duties, equivalent obligations are not consistently imposed on those who exercise shareholder power on behalf of the state. This creates an asymmetry in which authority may be exercised without corresponding legal responsibility.
Effective reform requires a recalibration of the governance architecture underpinning state-owned companies. This includes reinforcing board independence, clarifying the role of the state as shareholder within a rules-based framework, and extending accountability mechanisms to ensure that all exercises of power are matched by responsibility.
Dr Tong-Mongalo’s work bridges legal doctrine and practical governance challenges through adjudication, advisory work, and contribution to corporate law reform initiatives.
The future of state-owned companies depends on governance frameworks that are clear, enforceable, and anchored in accountability.
