2 SOE Regulatory Environment SOE enabling LegislationCompanies ActMemorandum and Articles of Association / MOIPublic Finance Management Act,1 of 1999* Treasury Regulations* Shareholders Compact* Significance and Materiality Framework* Corporate PlanSector legislation and policies (e.g. Electricity Act, Electronic Communications Act)King IIIPublic Audit ActOther general legislation, guidelines and policies (e.g. tax, labour, environmental laws)* Responsible Corporate citizen2
3 Shareholder Management The shareholder has specific powers and responsibilities in the SOE governance systemPresidencyPerformance of Minister of Public EnterprisesParliamentTransparency and accountabilityShareholderExecutive AuthorityShareholder ManagementDefines powers and responsibilities of shareholder viz a viz the Board and ManagementCompanies Act & PFMA establishes relationshipBoardAccounting AuthorityManagement AgreementBoard cascades delegations and performance expectations down to managementManagement
4 approving the remuneration of directors The Shareholder is primarily responsible for the appointment of the BoardShareholderthe appointment and removal of directors from the Board, which includes the appointment of executive directors (CEO and CFO) who are appointed ex officio; andapproving the remuneration of directorsBoardThe Board as the custodian of the company is expected to act in the best interests of the SOE and the shareholder.The Board has an oversight role to review and monitor management’s conduct of the company affairs and operations, its delivery and achievement of strategic, business, operations and financial goals and other objectives.ManagementManagement and control of a company falls under the Board of Directors in terms of both the Companies Act and the Articles.The Executive Management (represented by the CEO and CFO) is accountable to the Board and the Board is accountable to the shareholder. Thus the Board would manage the performance of these executives.Executive management is appointed and managed as part of an employment relationship governed by employment law and Human Resource principles.4
5 Shareholder Expectations and Governance Framework: Contents SOE stakeholder/accountability structureDPE Statutory mandate for SOE OversightPFMA & National Treasury RegulationsCompany LawAnnual General MeetingsInvestor BriefQuarterly reports and Annual Financial StatementsStrategic Intent StatementDPE GOVERNANCE TOOLSShareholder compactSignificance and materiality FrameworkCorporate PlanTransaction guidelines and section 54 ApprovalsBoard performance evaluations and attendanceBoard appointments and remuneration55
6 Strategic SOE oversight Shareholder compacts (TR 29.2)Annual performance agreements between the Minister and the Board and signed at the AGMRequired to document mandated key performance measures and indicators agreed between the Minister and the BoardShould also include Board objectives and Board effectiveness assessmentCorporate Plans (§52 PFMA and TR 29.1)Prepared and submitted by the Board and Covers a 3 year periodSets out thestrategic objectives and outcomes agreed in the shareholders’ compact;SOE strategic and business initiatives interpreting SOE’s mandate;KPIs,Risk mitigation plan, fraud prevention plan; materiality and significance framework and a financial planAny additional information requested by the MinisterQuarterly (TR 29.3) and Annual reports (§55 PFMA and §286 Companies ActFacilitate effective performance monitoring, evaluation and corrective actionDPE analysis to determine progress with implementing Compact i.r.t agreed mandate and KPIsElectronic Dashboard established for timely reporting by SOE to monitor trends(in financial and operational performance, capital investment programme, environmental impact assessments, socio-economic, governance, skills development, competitive supplier development programme and property disposals)Key issues: timeous information that is accurate and relevant
7 Strategic SOE Oversight Cont… DPE has developed additional performance monitoring and evaluation systems:Strategic intent statements:primary communication tool of the State’s expectation of the SOE strategyContains the SOE’s strategic purpose, scope of business, core business consultation thresholds or investment strategy;DPE to consult with sector and policy department, NT and the National Planning Commission to determine SOE strategy.Investor BriefsIssued by Minister to SOE Boards quarterly advising them of performance trends and highlighting the need for corrective action in the event of any deviation from the agreed key performance areas and indicators.Boards are expected to respond indicating measures to address highlighted concerns or mitigate emerging risks.
8 Performance Monitoring & Evaluation DPE has an obligation to review the performance of SOE.DPE monitors SOE performance on a quarterly and annual basis.Corporate plan risk assessment done in reference to the mandate and strategic objectives of the SOE (assessment of what events or conditions have prevented or what uncertainties could prevent the SOE of meeting the set objectives)Quarterly & annual reports analysed to determine whether SOE performance is on track with the corporate plans, whether strategic objectives have been met and to highlight any emerging risks.
9 The shareholder management process integrates national strategic objectives into SOE planning and operationsStrategic Intent StatementPrimary tool to communicate State’s expectations of SOE strategyIntragovernmental consultations with sector depts, NT and the Presidency to ensure clarity and transparency of objectives for the SOE and articulation of trade-offs between policy, regulatory, customer and SOE financial interests.Shareholder CompactMinister and SOE Board conclude a shareholder compact annually (Treasury Regulation 29.2) .Documents the mandated key performance measures and indicators to be attained by the SOE in delivering the desired outcomes and objectives as agreed between the SOE Board and the Minister.Corporate PlanSOE submit corporate plans and budgets annually to Minister and National Treasury at least one month before the start of financial year (PFMA Sec 52).DPE assesses SOE corporate plans to determine whether the strategies and financial plans are consistent, coherent and aligned with government objectives, degree of sensitivity to assumptions in the forecasts to assess financial support and borrowing required as well as the timing thereof.Performance Monitoring & EvaluationDPE reviews SOE performance (Treasury Regulation 29.3)Isibuko DashboardMinister issues Investor Briefs to SOE Boards on emerging SOE performance trends, highlighting need for corrective action in event of any deviation from agreed key performance areas and indicators.SOE AGMs.SOE reporting to Parliament (PFMA Sec 65).9
10 DPE has developed a comprehensive risk management framework Risk management — the comprehensive process of identifying, assessing and responding to risks — is not an end in itself. When undertaken effectively, it can deliver a range of benefits, by:improving planning processes by enabling the key focus to remain on core business and helping to ensure continuity of service delivery;reducing the likelihood of potentially costly ‘surprises’ and preparing for challenging and undesirable events and outcomes;improving efficiency and general performance;contributing to the development of a positive organisational culture, in which people and organisations understand their purpose, roles and direction; andimproving accountability and governance — in relation to both decision-making and outcomes. This is particularly important for public sector entities, which exist to deliver outcomes for the benefit of the public.
11 Risk ManagementKey questions to consider in undertaking this analysis include:the type of risk – technological, financial, safety etc;the source of risk – external (political, economic, natural disasters) or internal (reputation, security, knowledge management, etc);what is at risk – area of impact and the type of exposure (people, reputation, operational results, assets etc); andthe level of control – the degree to which the agency can influence, affect or manage the risk.
12 Risk ManagementThe risk management process consists of the following main steps:Objective setting (what is our mandate, objectives, etc)Risk identification (what can go wrong, what can prevent objectives being achieved, causes of risk?)Risk analysis (what are the chances of the risk occurring [LIKELIHOOD], what will be the effect when it occurs (IMPACT]).Risk response (avoid, accept, reduce or share the risk by developing controls, procedures, etc to reduce risk to acceptable levels).Control activities (policies and procedures are established and implemented to ensure the risk responses are effectively carried out).Information and communication (information is captured and communicated so that people are able to carry out their risk management duties).Monitoring (ongoing management activities and separate evaluations).12
13 Risk ManagementIsibuko business intelligence dashboard system has been implemented to allow for timely reporting by SOE and for SOE performance assessment by DPE.Risk assessed at 3 levels:SOEDPEPortfolio