Improved competence

Good practice Protecting the corporate governance image of Leda is vital

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.

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 &amp; 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

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

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