: Exploring critical factors for effective corporate governance practices of the schedule three state-owned entities in KwaZulu-Natal.

Abstract

ABSTRACT The State-Owned Entities (SOEs) are considered strategic vehicles allowing Government to deliver on the socio-economic needs of the citizens of South Africa, the economic infrastructure, provision of vital services and products as well as providing employment and capacity building. Government has come up with a National Development Plan (NDP) and the focus has been to roll out the plan, with SOEs playing a critical role in this process. Successful SOEs will put South Africa at a competitive advantage, but the key to better company performance is good corporate governance, which provides the regulatory framework for acceptable practice, strategic direction and sound business judgement. As SOEs are primarily owned and led by Government, Government departments and Boards of Entities are partners in providing corporate governance to ensure their success. SOEs are different from the private sector because corporate governance includes both Government and Boards, with Government making final decisions concerning the allocation of finance and the selection and retention of Board Members. Both groups are therefore involved with the process of governing these companies. It has emerged in this study that the quality of corporate governance depends on whether Corporate Governors have the capacity, knowledge, experience, expertise and integrity to make and carry out wise decisions in the interests of the shareholder, company and stakeholders including the public. This study was aimed at exploring critical factors that contribute to effective corporate governance practiced by the Schedule Three SOE’s in KwaZulu-Natal (KZN), in order to establish an understanding of and recommend strategies to improve their corporate governance, using both the quantitative and qualitative research methods. The empirical objectives of this thesis were firstly to identify internal and external factors contributing to the understanding of the corporate governance practice of Schedule Three SOEs, secondly to evaluate the level of awareness and knowledge about corporate governance practices among the different categories of these Entities, thirdly to examine the extent to which their different categories comply with the provisions for corporate governance and lastly to recommend strategies for improvement of corporate governance practices within Schedule Three SOEs in KZN. The results of the research revealed that the institutional quality of SOEs must be measured against the detail and quality of their decision-making structures, processes and annual reports issued. Existence of corruption and collusion-free SOEs based on good governance are the foundation of the country’s economy. The results suggested that for good corporate governance to be practised, several critical factors need to be present, inter-alia: structures, systems and processes, the right mix of intelligence, knowledge, experience and expertise, regulatory certainty and understanding as well as principles and practice of sound corporate governance.