Asset manager Futuregrowth attracted praise and criticism, possibly in equal measure, when it announced in August 2016 that it was suspending lending to six large State-owned enterprises (SoEs), owing to concerns over the state of their governance. The list included the Development Bank of Southern Africa, Eskom, the Industrial Development Corporation, the Land Bank, the South African National Roads Agency Limited and Transnet.

The move predated the #GuptaLeaks emails, which blew the lid on the so-called State capture project. Nevertheless, it came amid growing concern that some of the SoEs had become, or were becoming, conduits for the diversion of money to a politically connected elite. By May the following year, a group of academics were able to confidently term developments a “silent coup”. In their ‘Betrayal of the Promise’ report, the academics went to some lengths to describe how well-placed individuals located within government, at SoEs and in the bureaucracy were increasingly displacing the institutions and indivi- duals meant to make decisions for the Constitutional State.

To its credit, Futuregrowth did not leave the matter at the level of a principled media statement. Where possible, it actively engaged with the SoEs in an effort to understand their governance protocols, identify areas of weakness and, where feasible, provide solutions.

It subsequently documented the lessons garnered in a 47-page booklet, which should become staple reading for any new member of an SoE board.

The chapter on ‘reporting and disclosures’ is particularly interesting, as it highlights some serious shortcomings with the current rules governing the debt capital markets, as codified in the JSE’s Debt Listing Requirements. The chapter laments the fact that the rules governing debt-capital-market issuers are far weaker than those governing equity-market issuers, despite that fact that the debt issuers are borrowing public money.

Futuregrowth argues, correctly in my view, that, in order to access public capital markets, issuers should subject themselves to a higher degree of scrutiny and commit to a greater level of transparency and disclosure than is currently the case.

The booklet is critical of both the JSE, which has been “slow to support calls for better protections”, and the banks, which insist on stronger protection for their loans to SoEs than is extended to bondholders. “Banks are quite willing to sell bonds to pension fund investors that they themselves would not buy.”

Some quite reasonable remedies are suggested, including that all public disclosures be published on the Stock Exchange News Service. It is public money after all.

The booklet also offers useful recommendations on dealing with everything from conflicts of interest in SoE boards to improving the workings of board subcommittees. It also offers advice for bolstering adherence to both the King IV Code on Corporate Governance and the Public Finance Management Act.

In the end, though, the most useful takeaway lies in the argument that “sunlight is the best disinfectant”, which, in the case of SoE governance, requires “increased public and timely disclosure of key procurement decisions, conflicts of interest, transactions with politically exposed people, and all deviations from policy”. Amen to that!