Zondo Commission Lessons: How Properly Constituted SOE Boards Still Failed

Between 2018 and 2022, the Judicial Commission of Inquiry into State Capture - chaired by then-Deputy Chief Justice Raymond Zondo and known simply as the Zondo Commission - worked through more than three hundred witnesses and hundreds of thousands of pages of evidence. Its findings named Eskom, Transnet, South African Airways, Denel and PRASA. Read carefully, though, the Commission was not only an account of corruption. It was a forensic post-mortem of governance. At almost every one of these state-owned entities a board existed, a board sat, a board approved. The controls the law required were, on paper, all in place. And they failed anyway. The uncomfortable question every SOE director must be able to answer is this: how did competent people, on properly constituted boards, allow it to happen, and what would you have had to do differently?

The board was never missing; the diligence was

The Commission did not reveal that South Africa lacked governance rules. It revealed that rules without diligent directors are simply theatre. An SOE board sits between the Shareholder Minister and management, governed by King V and the Public Finance Management Act, and as the Accounting Authority under the PFMA it carries duties that can attach personal liability for irregular, unauthorised and wasteful expenditure. The Zondo record is where those duties were tested in the real world and where they broke. What follows are the four patterns of failure the Commission exposed, each mapped to the King V principle or PFMA provision it defeated, and the five behaviours that defend against them.

Failure one: captured composition

King V Principle 5 requires a board to comprise the appropriate balance of knowledge, skills, experience, diversity and independence to discharge its duties objectively. At several entities the Commission found that appointments, which for SOEs flow from the Shareholder Minister, were used not to secure competence but to secure compliance. Directors were installed for what they would not question, not for what they knew. The mechanism matters, because this is where a director must stay alert. The Minister’s power to appoint is lawful. But the board that results still owes its fiduciary duty to the entity, not to the Minister who appointed it. The failure was not the appointment power; it was directors who behaved as though the Minister’s preference overrode their duty of good faith to the company. How you arrived on the board does not dilute your legal duty once you are on it. The moment you treat your appointer as your principal, you have created the first condition of state capture.

Failure two: subverted procurement and a hollow Accounting Authority

As Accounting Authority under section 51 of the PFMA, the board must ensure the entity maintains effective, efficient and transparent systems of financial and risk management and internal control. The Commission documented how that duty was hollowed out at Transnet and Eskom: contracts inflated, deviations from open competitive bidding turned from exception into routine, single-supplier confinements manufactured, and business cases reverse-engineered to justify decisions already taken. Critically for a director, many of these transactions came to the board for approval. The board was not bypassed. The board was used. Directors ratified transactions on management representations they did not test, in board packs they received too late to interrogate, under time pressure that was itself a control failure. This is the difference between an honest director and a diligent one. Section 51 does not only ask whether you personally profited; it asks whether you ensured effective systems of internal control. Passivity in the face of red flags is itself a breach.

Failure three: silenced dissent

The Commission heard evidence of directors and executives who did raise concerns, about a contract, an appointment or a suspension, and who were isolated, removed or overruled. Committees that should have functioned as controls, particularly audit and risk committees under King V Principle 6, were weakened, reconstituted or ignored. The lesson is behavioural, not just structural: good governance is the willingness to be the uncomfortable voice in the room. Understand what your duty of care, skill and diligence requires. If you oppose a resolution, insist that your dissent is minuted in your name. A recorded objection is both a governance control and your personal legal protection. Directors who went along quietly and later claimed they had reservations found that unminuted reservations are, in law, worth very little. The minute book is where diligence becomes evidence.

Failure four: neutralised assurance

Every SOE board sits atop a system of assurance, internal audit, external audit and, for public entities, the Auditor-General of South Africa, and under section 55 of the PFMA the Accounting Authority must submit audited financial statements and an annual report. Where capture advanced, the Commission found these channels neutralised: internal audit findings suppressed or their leadership replaced, and external and Auditor-General qualifications downplayed to the board as technical noise rather than treated as the warnings they were. The defensible director treats a repeated audit qualification, a recurring internal audit finding, or an unexplained change of auditor as a governance emergency, not a compliance formality. Assurance exists so that the board is not dependent on management’s own account of itself. Allow management to filter, summarise or dismiss the very assurance designed to check management, and you have surrendered the independence the whole structure was built to give you.

The five defensible behaviours

The Zondo findings reduce to five behaviours, each answerable to the law you already know. First, owe your duty to the entity, never to your appointer: however you were appointed, test every decision against the entity’s interest, not the Minister’s preference. Second, interrogate before you approve: a late board pack is grounds to defer, not to rush, and ensuring effective internal control is a section 51 duty you cannot delegate back to the management you oversee. Third, record your dissent: diligence that is not on the record is diligence that cannot protect you. Fourth, protect the assurance function: treat internal audit, external audit and the Auditor-General as your instruments, not management’s, and escalate recurring findings and unexplained changes as governance emergencies. Fifth, watch the pattern, not just the transaction: capture is rarely a single crime but a sequence of deviations that become routine, dissenters who quietly leave, and assurance that is repeatedly explained away, and the director who watches the pattern acts before the damage is irreversible.

The board that chooses differently

At every entity the Commission examined, the failure was not that the board could not act. It was that the board chose not to. That single sentence is the whole lesson. You can now name the four patterns, captured composition, subverted procurement, silenced dissent and neutralised assurance, and map each to the principle or provision it defeated, and you carry five behaviours to resist them. Your duty, and your protection, is to be the director who chooses differently, and to make sure the minute book shows it.