Review 3 final 2 - TAU - National Treasury

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TECHNICAL ASSISTANCE UNIT REVIEW | The Reality as well as the Buzz The Reality as well as the Buzz: Assuring Governance within Public Entities In South Africa, Public Entities can be placed into two broad categories based on their level of autonomy. The first are Government Business Enterprises (GBE), which operate like private entities in the open market, generating an income, paying taxes and, in some cases, paying dividends. The second kind of Public Entity is that which is an extension of a government department and which performs a specific function on behalf of government. This kind will derive its annual budget from the relevant department. The common thread with the two types of Public Entities is that they are not only accountable to their “ delivery of services. Boards, but also to the Executive and Legislative arms of the state as well as the citizens of this country (see Diagram and Text Box on page 13). But what does this all mean The importance of a reliable and effective set of checks and balances within any entity, whether public or private, is an assurance to stakeholders that the organisations representing their interests are managed soundly and ethically. This would underscore values such as accountability, integrity, leadership and transparency without which the aforementioned assurances cannot be met. Accountability is the critical concept of ‘governance’-be it buzz word or realityit is the mechanism that ensures that these critical assurances can be met. Given that these organisations are in place to meet the needs of the people, governance in these organisations is not meant to be static nor rigid; rather, it is an iterative process, being shaped and refined as and when it is necessary to live up to diverse stakeholder requirements, yet with layers and levels constitutionally guaranteed (see Diagram and Text box on page 14). Public Entities are established in the Public Sector, but outside the Public Service, typically for reasons of - (a) Strategic, social or economic intervention by the State or to deal with strategic risks and dangers that the State or society faces to its security, health, prosperity or wellbeing; and/or (b) Adopting commercial and business principles in service delivery when it is required; and/or (c) Signalling that there is need for objectivity and more operational autonomy, yet retaining accountability in the ” 12 page Enabling change for development
TECHNICAL ASSISTANCE UNIT REVIEW | The Reality as well as the Buzz With a world newly emerging from the impact of what many may term as a ‘crisis in governance’, there is both comfort and confidence in the fact that South Africa constitutionally undergirds such robust governance. Diagram: Public Entities Kurt Morais Former Senior Technical Assistant: National Treasury With acknowledgement to the National Treasury’s Assets and Liabilities Unit for providing information for this article “ Government Business Enterprises, according to the Public Finance Management Act, are defined as: • “A board, commission, company, corporation, fund or other entity (other than a national business enterprise) which is established in terms of national legislation, fully or substantially funded from either the National Revenue Fund or by way of tax, levy or other money imposed in terms of national legislation; and accountable to Parliament.” • “A national government business enterprise means an entity which is a juristic person under the ownership control of the national executive; a. has been assigned financial and operational authority to carry on a business activity; b. as its principal business, provides goods or services in accordance with ordinary business principles; and c. is financed fully or substantially from sources other than the National Revenue Fund or by way of a tax, levy or other statutory money.” (“ownership control”, in relation to an entity, means the ability to exercise any of the following powers to govern the financial and operating policies of the entity in order to obtain benefits from its activities: a. To appoint or remove all, or the majority of, the members of that entity’s board of directors or equivalent governing body; b. to appoint or remove that entity’s chief executive officer; c. to cast all, or the majority of, the votes at meetings of that board of directors or equivalent governing body; or ” d. to control all, or the majority of, the voting rights at a general meeting of that entity.) page 13 Enabling change for development
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Review 3 final 2 - TAU - National Treasury

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