REVIEW OF GOVERNANCE FRAMEWORK
FOR PUBLIC ENTITIES
Portfolio Committee Meeting
Department of Public Service and Administration
January 2004
Slide 1
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CONTENT
• Background
o Problem Statement
o Primary Objectives & Expected Outcomes
o Projected Timeframes
o Scope
• Work Streams
• Project Organisation
• Progress to Date
• Communication Plan & Stakeholder Management
• Strategic Impact
• Way Forward
•Summary
Slide 2
• Closure
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Background: Problem statement
After several years of establishing public entities and enterprises to enhance service
delivery, government realised the following weaknesses in them:
•
There are inadequate and inconsistent corporate governance
arrangements
•
Public entities do not always account to the legislature or the executive
as expected but to an appointed board
•
They compromise the existence of single public service as a
constitutional requirement making the restructuring of public service to
become cumbersome
•
Public enterprises have made some progress working with DPE but
there was potential for improvement ( e.g. Development of a protocol
on Corporate Governance)
Slide 3
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Background : Problem statement
•
Fragmented regulatory frameworks
– PEs are established in terms of their Enabling Acts or the Companies Act all with
their own requirements
– Various corporate forms exist – Trusts, Trading Entities, Section 21, Companies
– Remuneration and conditions of service are provided for in Enabling Acts and not
the Public Service Act which lead to inconsistent interpretations
•
Current Classification framework are no longer sufficient to provide for
flexible institutional options to support service delivery ( Schedules 3A and
3B of PFMA)
•
Governance arrangements are ineffective i.t.o
– Departments do not attend to managing performance adequately
– Inconsistencies in the levels of remuneration of Board members and staff across
PEs
– Governance arrangements (King Code) are applied differently by PEs
– There is little regard for preferential procurement policy which lead to
Slide 4
unfair application of tender processes
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Background: Primary objectives
As a result , Cabinet mandated DPSA and NT in 2002 to review governance
frameworks of all non-business PEs (Schedule 3A) and GBEs (Schedule 3B).
DPSA and NT were also mandated to establish a panel to review all business cases
for entities to be developed by departments prior to establishment.
DPSA and NT are jointly executing the review project with the following
primary objectives:
•
To design a coherent regulatory framework supported by sound
governance practices
•
To promote unified (not uniform) machinery of government in line with
Constitutional values and principles for public administration
•
To improve knowledge of applicable legislation in public entities
The panel to evaluate public business cases is also operational and is
comprised of officials from both departments.
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Background: Expected Outcomes
After implementation of the recommendations of the project, government
expects the following outcomes:
•
Improve classification framework (Definition, Types)
•
Assess the role of PEs in their current corporate form
– Develop preferred corporate forms - Sect 21 companies, Trusts
– Proposals for PEs to evolve to new corporate forms
•
Improve corporate governance, accounting arrangements and fairness
of procurement procedures
•
Improve Performance Management and HRM
– Perf mang corporate level & staff
– Grading, remuneration, fringe benefits - board and staff
– Collective bargaining arrangements
•
Review the appropriateness of regulatory frameworks in relation to PEs
and propose amendments
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Background: Project Timeframe
Phase 1
• Data Gathering
• Classification Framework
We are here!
Phase 2
• Corporate Status
• Legislative Review
• Corporate Governance
• Performance Management
& Review
Aug 03
Slide 7
Jan 04
May 04
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Background: Scope
185 entities of total (recorded) 336 where there’s a transfer of funds totaling R15bn
National Sphere
of Government
Government Clusters
Organisational
Components
Head
Office
Provincial
Administrations
Regional
Office
District
Office
Departments
Head
Office
Exclusive Functional Competencies
Public Service
33 Departments
Provincial Sphere
of Government
District
Office
Regional
Office
Constitutional
Institutions
Public Entities
National
Public Entities
Provincial
Public Entities
Business Enterprises
Business Enterprises
Major Public Entities
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Concurrent Functional Competencies
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Background: Scope
The following are the exclusions from the scope of the current project:
•
Provincial entities will be reviewed following a separate process after
liaison with relevant stakeholders. Provincial Directors-General and
Treasuries will be requested to conduct complementary reviews of
public entities within their provinces.
•
The provincial process will leverage lessons learnt from the current
project
•
The current project will not cover all entities but will be limited to
Schedule 3A (e.g.. SETAs, SITA, Legal Aid Board) and 3B entities
(GBEs egg. Water Boards, SABS)
•
The current project will not focus on the review of individual entities but
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Slide 9
their overall status quo
Work Streams
The following are the primary focus of each work stream of the project
• Data Gathering, gather data from the whole population under study, collate it and provide
preliminary findings. Questionnaires for Departments, Chairmen of controlling bodies of P.Es and
CEOs were used as primary tools to gather data. Workshops and interviews were for follow-up.
•
Classification Framework, gather data on international practices of classification of public
entities, analyse the data, workshop with key stakeholders and recommend a new framework
•
Corporate Status, based on the findings of data gathered and researched best practice,
recommend a new framework for corporate status determination
•
Corporate Governance Review, based on the findings of data gathered and researched best
practice, recommend a new framework for corporate governance standard / code
•
Legislative Review, based on the findings of data gathered and researched best practice,
revise the current legislative framework accordingly
•
Human Resource Management(HRM) and Performance Management(PM)
Review, based on the findings of data gathered and researched best practice, determine a new
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policies for HRM & PM
Project Organisation
Cabinet
Ministers: Finance / Public Service and Admin / Governing Ministeries
Project Steering Committee
Project Manager / Secretariat
Phase 1
Phase 2
Classification Framework
Legislative Review (1)
Corporate Governance (3)
Data Collection Teams
Corporate Status (2)
Performance Management (4)
The project is jointly managed between the DPSA/NT with the assistance of local
and international service providers in close co-operation with government
departments and PEs
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Progress to Date: Phase 1
Phase 1(August 2003 – January 2004)
• Data
Gathering
o data gathering by means of structures questionnaires, interviews and workshops have been
completed
o a data-set is being finalised
o a workshop was held to review the first draft of the findings and analysis
o a final report will be submitted and presented to the project steering committee in January 2004
• Classification Framework,
o international and local research has resumed
o a workshop was held with the steering committee to clarify expectations.
o the final report will be delivered in March 2004.
•
Reports from both the Data Gathering and Classification Framework will input to
phase 2 of the project
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Progress to Date: Phase 2
As indicated earlier, consultants have just resumed their duties and thus far they
have presented their work-plans. They have been introduced to the service
providers of phase 1 for liaison on their work
Phase 2 (January 2004 – May 2004)
• Corporate
Status
• Governance
• Legislative
• Human
Slide 13
review
Resource Management & Performance Management
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Progress to Date: Preliminary findings from
phase 1 work
On the overall the findings are validating the concerns on the public entities. A
significant amount of the data have not been analysed and therefore the findings
presented below are preliminary:
• There seems to be misalignments between departments and their respective
public entities on the corporate governance arrangements
• There seems to be limited understanding of the legislative framework by some
of the controlling bodies and CEOs of public entities
• Although there seems to be procurement policies in place, these are mainly not
aligned to the Preferential Procurement Policy (PPP)
• Some public entities are not clear about their reporting lines and the reporting
process they should follow, including frequency etc.
• It seems that the strategies of PEs are driven more formally by their enabling
legislation rather than performance management and service level agreements
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• 70 unlisted PEs have been identified and their information is being incorporated
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Communication Plan & Stakeholder
Management
•
Portfolio Committee, Ministers, Cabinet, MECs and social partners to
be kept informed of progress
•
Project Steering Committee submits findings and proposals through
DPSA / NT , and relevant department
– to the Executive, and then
– to Cabinet for decision making
•
Slide 15
Provinces will be encouraged to undertake similar exercise
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Strategic Impact
•
Good corporate governance in Public Entities enables improved service
delivery in line with Batho Pele principles
•
Public Entities with good corporate governance are better placed to deliver
on other government priorities such as poverty alleviation
•
Compliance to international practices will lead to improved assessment of
the S.A economic status by global bodies (e.g. International Monetary
Fund). This can result in improved rankings and help attract Foreign Direct
Investment.
•
Achievement of these is a step towards fulfillment of NEDLAC
commitments in relation to the Growth and Development Summit (GDS) by
Government.
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Way Forward
• Follow-up communication sessions with key stakeholders on
progress and deliverables
• Interrogation of deliverables
• Closure report at the end of the project
• Encouraging provincial governments to review of Provincial
entities in co-operation with provincial stakeholders
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Summary
•
The primary objectives of the review project is to design a coherent
regulatory framework and establish the required institutional
mechanisms to support service delivery.
•
The outcomes of the review would contribute to improving
– the regulatory framework that governs PEs
– the oversight of Government over PEs; and
– The corporate governance of entities including performance management,
human resource practices, accounting arrangements and fairness of
procurement procedures
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Q & A Session
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