A conceptual framework for the legitimate elimination of the developmental mandate by state-owned companies in South Africa

Abstract

The Republic of South Africa has adopted developmental ideals as part of the principles governing its public administration, including using state-owned companies (SOCs) as a mechanism for executing the developmental mandate. However, in terms of s 195(1)(b) of the Constitution of the Republic of South Africa, 1996, these principles must be balanced with the principle of promoting ‘[e]fficient, economic and effective use of resources’. South Africa’s state-owned entities currently face numerous challenges affecting their efficiency, effectiveness and viability. This article focuses on SOCs as legal entities and considers structural changes to the legislative framework within which these entities function to address these challenges. The proposed statutory amendments set out in this article aim to utilise the existing tested and functioning framework of the Companies Act 71 of 2008 to align the definitional requirements in the Public Finance Management Act 1 of 1999 that certain state-owned entities pursue purely commercial mandates with the requirement that a ‘state-owned company’ (as defined in the Companies Act) is a profit company which must operate for the financial gain of its shareholders. The article also proposes the introduction of a ‘stateowned enterprise’ into the Companies Act to accommodate the developmental mandate in a legislative structure which fosters more sustainability and accountability than the current legislative regime.