One thing that President Cyril Ramaphosa got right in 2024 was to put both the Passenger Rail Agency of South Africa (Prasa) and Transnet under the same cabinet minister.
It never made sense to separate accountability for passenger and goods trains, with Prasa falling under the department of transport and Transnet Freight Rail answering to the department of public enterprises (now abolished). They use the same tracks and, in many cases, the same operating systems. The division at the turn of the 21st century created artificial rivalries, competition for resources, and duplication of bureaucracy.
Blurred lines of accountability have not been the only problem in the governance of rail.
There were good reasons for corporatising state entities like Eskom and Transnet in the 1980s. The idea was to instil better governance, particularly in financial discipline and reporting. However, government ministers increasingly referred to themselves as “the shareholder”, used with the implicit meaning of being the ultimate executive authority. In fact, according to the King codes of governance, shareholders do not own the company. They do appoint the board, which should then appoint its chair and CEO.
The King codes apply not only to listed and nonlisted companies, but also to state-owned companies (SOCs). The experience of the past 25 years is that South Africa’s SOCs have had appallingly bad governance. This was in part due to criminality, as was revealed in exhaustive detail by the reports of the Zondo commission, but also to a general dereliction of the duties of boards, even among honest directors. These duties include exercising independent judgment, care, skill and diligence.
The consequences of bad governance are most obvious in Eskom, Transnet and Prasa, the biggest SOCs in terms of assets and operations
However, the illusion of private sector-style governance at SOCs persists. They have all the structural paraphernalia of a listed company: directors earning generous fees, board committees, and glossy annual reports crammed with graphs and numbers. In theory, they tick all the governance boxes. In reality, the boards of these entities have deferred to the wishes of their “shareholder” and have not behaved with independence, let alone with diligence, care and skill.
The consequences of bad governance are most obvious in Eskom, Transnet and Prasa, the biggest SOCs in terms of assets and operations, and integral to the functioning of a modern economy.
Business Leadership South Africa CEO Busisiwe Mavuso has said that interference by the government is the main reason behind the dysfunction at SOCs. “Good governance starts with a board being able to hold the executive management to account. To do that, the board needs to have appointed — and have the right to dismiss — the CEO. Yet, in both Eskom and Transnet, as well as all other SOCs, the CEO is appointed and dismissed by a minister, who can, under the organisations’ memorandum of incorporation, ignore the board in the process.”
In such circumstances, governance is seriously flawed and can easily cease to exist, in the sense that the board is powerless — a “toy telephone” — and the company is run simply by instruction from its political masters.
The elaborate charade of boards should be abolished, and the railways (and other SOCs) should revert to being government departments. At present, the board is held to account but does not have the power, unless the responsible minister understands how things should work and lets the board get on with it. That leaves a great deal to chance.
