Good practice Protecting the corporate governance image of Leda is vital
Ensuring good corporate governance has been one of the core considerations in the amalgamation of four Limpopo state-owned enterprises into one agency that will drive the implementation of the province’s economic development plans.
The government of Limpopo has invested considerable resources in the Limpopo Business Support Agency (Libsa), the Limpopo Economic Devel- opment Enterprise (LimDev), Trade & Investment Limpopo (TIL) and the Limpopo Agri-business Development Corp (LADC). But a critical question that arose in executive discussions was whether the effect of these entities was worth the resources injected in them. Though each entity has had its own success stories, there has also been considerable duplication of services. These agencies have all worked together at some level for many years. Quite often they would invite one an- other on trade missions, engagements with potential funders and various other outreach programmes. Merging them will ensure that these processes are streamlined properly and that Limpopo has one agency, with a strong identity and a clearly-defined mandate to pro- mote and implement the province’s eco- nomic development plans.
<div>
The interim board chair of the new Limpopo Economic Development Agency (Leda), Nombulelo Mkhumane, says good corporate governance means more than just conforming to the requirements of the King codes, the Companies Act and various other legal requirements. Rather, it is an intricate process in which board members have to bring together their collective skills in ensuring that both people and finances are properly managed.
It is not surprising that Mkhumane was placed at the helm of the interim board. She is held in high regard in finance circles and has an excellent track record in terms of the performance of the various organisations whose boards she has chaired.
Explaining how the process has un- folded thus far, she says: “When the interim board was announced, it im
mediately started setting up the systems and processes by which the new entity will be governed. A large part of the process also involved defining the re- lationships among the key players, in- cluding the leadership of the four entities that were being amalgamated, the board, government and to some extent funders and beneficiaries of the various entities.”
“Managing people dynamics during a merger is a delicate process and as an interim board we have focused on en- suring a symbiotic relationship with the executive team. We are providing the necessary guidance and support to en- able them to deal with the complexity of starting a new entity while continuing to deliver on the mandates of the entities being merged.”
When the Limpopo department of eco- nomic development, environment & tourism (Ledet) indicated that it was ready to go ahead with the establishment of Leda, Mkhumane immediately em- barked on a mission to encourage a culture where the leadership of the four merging institutions would work to- gether for the common good. CEOs and chief finance officers were invited to attend joint meetings with the interim board to share good practices and learn from one another.
She believes that safeguarding the cor- porate governance image of the new entity will go a long way in enhancing its chances of success. Qualified audit reports for any of the merging agencies will negatively affect the new agency. “A good corporate governance image enhances the reputation of an organ- isation and makes it more attractive to customers, investors, suppliers and other contributors,” she says. “As an interim board we have done due diligence on all operations in terms of the requirements of the Companies Act, the Public Finance Management Act and all other relevant legislation. We’ve walked a tightrope with the office of the auditor-general to iron out potential audit glitches.”
Nombulelo Mkhumane
She is cautiously optimistic about the state of readiness to launch the new entity, likening it to the gestation period for baby elephants. “A process of this magnitude requires at least three years. The first two phases of the process have gone well. It is now up to the new board, which comes into effect at the beginning of 2013, and the interim executive team to lead the final phase. This will involve articulating the business case and trans- lating it into implementable programmes.“The provincial treasury is generally supportive of institutions that have a strong business case. So, it is going to be very important to get the business case right in order to receive the level of project funding that will be required.”
She highlights three key areas that are likely to receive priority attention — human resource development, data collation and an intensive communication cam- paign. The success of this robust plan will hinge on the agency’s ability to attract the right calibre of people. The board and executive team will have to look at the skills and expertise currently available within the merging institutions and match them with the skills requirements of the new entity. Any gaps that exist will then have to be augmented with ad- ditional capacity over the next few years.
Reliable economic data will also assist in deciding on the programmes and projects that are likely to yield the best returns. Pockets of data are available on the state of the province’s economy and the sectors in which opportunities exist. This, however, needs to be synthesised and consolidated so that it informs the agency’s priority programmes.
An agency of this magnitude will also need a strong communications campaign both internally and externally. Leda’s own staff will have to be kept abreast and consulted on major developments as they are not only the backbone of the organisation but also its most powerful ambassadors. A stakeholder engagement plan has to be developed to ensure that the needs of each stakeholder group are clearly articulated and addressed at the right level. Lastly, but equally important, a mass communication campaign will have to be embarked on both within the province and externally to promote the new agency and attract funders and ser- vice delivery partners.
The province has unique dynamics in terms of both its economy and its de- mographics. An institution such as Leda will be ideally positioned to promote a clearer understanding of these dynamics and provide a platform for synergy among all the agencies whose mandates involve the advancement of the provin- cial economy.
It is envisaged that Leda will remain a public entity that will receive its initial core budget from Ledet. However, it will also have the latitude to raise its own revenue through equity investments. Ledet will oversee implementation of the agency’s mandate and strategic pri- orities, while entrusting its board to en- sure proper governance and account- ability. The agency will be accountable to its shareholder — Ledet — through an annual shareholder’s compact between the MEC and the board, business plans and budget that will be approved by the department, an annual report and var- ious publications detailing the perfor mance of various programmes. ■
“A good corporate governance image enhances the reputation of an organisation and makes it more attractive” — NOMBULELO MKHUMANE