1. DPE Shareholder Oversight & Risk Management

2. SOE Regulatory Environment
SOE enabling Legislation
Companies Act
Memorandum and Articles of Association / MOI
Public Finance Management Act,1 of 1999
* Treasury Regulations
* Shareholders Compact
* Significance and Materiality Framework
* Corporate Plan
Sector legislation and policies (e.g. Electricity Act, Electronic Communications Act)
King III
Public Audit Act
Other general legislation, guidelines and policies (e.g. tax, labour, environmental laws)
* Responsible Corporate citizen 2

3. Shareholder Management
The shareholder has specific powers and responsibilities in the SOE governance system
Presidency
Performance of Minister of Public Enterprises
Parliament
Transparency and accountability
Shareholder
Executive Authority
Shareholder Management
Defines powers and responsibilities of shareholder viz a viz the Board and Management
Companies Act & PFMA establishes relationship
Board
Accounting Authority
Management Agreement
Board cascades delegations and performance expectations down to management
Management

4. approving the remuneration of directors
The Shareholder is primarily responsible for the appointment of the Board
Shareholder
the appointment and removal of directors from the Board, which includes the appointment of executive directors (CEO and CFO) who are appointed ex officio; and
approving the remuneration of directors
Board
The 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.
Management
Management 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 structure
DPE Statutory mandate for SOE Oversight
PFMA & National Treasury Regulations
Company Law
Annual General Meetings
Investor Brief
Quarterly reports and Annual Financial Statements
Strategic Intent Statement
DPE GOVERNANCE TOOLS
Shareholder compact
Significance and materiality Framework
Corporate Plan
Transaction guidelines and section 54 Approvals
Board performance evaluations and attendance
Board appointments and remuneration 5 5

6. Strategic SOE oversight
Shareholder compacts (TR 29.2)
Annual performance agreements between the Minister and the Board and signed at the AGM
Required to document mandated key performance measures and indicators agreed between the Minister and the Board
Should also include Board objectives and Board effectiveness assessment
Corporate Plans (§52 PFMA and TR 29.1)
Prepared and submitted by the Board and Covers a 3 year period
Sets out the
strategic 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 plan
Any additional information requested by the Minister
Quarterly (TR 29.3) and Annual reports (§55 PFMA and §286 Companies Act
Facilitate effective performance monitoring, evaluation and corrective action
DPE analysis to determine progress with implementing Compact i.r.t agreed mandate and KPIs
Electronic 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 strategy
Contains 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 Briefs
Issued 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 operations
Strategic Intent Statement
Primary tool to communicate State’s expectations of SOE strategy
Intragovernmental 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 Compact
Minister 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 Plan
SOE 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 & Evaluation
DPE reviews SOE performance (Treasury Regulation 29.3)
Isibuko Dashboard
Minister 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; and
improving 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 Management
Key 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); and
the level of control – the degree to which the agency can influence, affect or manage the risk.

12. Risk Management
The 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 Management
Isibuko 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:
SOE
DPE
Portfolio

14. Risk Identification & Description

15. Risk Treatment & Assessment15

16. Charts are used to determine the change in ratings over time

17. Risks can be clearly plotted and ranked17

18. The risk profile of the SOE portfolio seems to be improving18

19. Thank You