Patronage, cronyism in parastatal appointments

Patronage, cronyism in parastatal appointments
By The Post
Sat 26 June 2010, 04:00 CAT

The appointment of Luambe Mondoloka as new Road Development Agency board chairman and his subsequent rejection by the Engineering Institute of Zambia raises a number of very important questions.

Henry Musonda, the president of the Engineering Institute of Zambia, says the appointment of Mondoloka was unacceptable because he was chief executive officer of Brian Colqhoun, Hugh O’Donnell Zambia, who are road engineering consultants for the Road Development Agency.

Musonda says someone neutral should take over the Road Development Agency board chairmanship and not a person who has business dealings with the Agency.

The problem of corruption and abuse of power will not go away if a lot of attention is not paid to the way appointments are made to the boards and management of state enterprises and other statutory bodies. Most of the problems we are having in our state-owned enterprises and other statutory bodies arise from the corrupt way directors and managers are appointed.

There is strong political input in the appointment of directors and managers of parastatals and other government-owned enterprises. Politically affiliated persons are often appointed to the boards and management of these entities at the expense of professionalism.

And there is a serious lack of transparency in the way these appointments are made; there is lack of defined processes and criteria of selection. And often, there is lack of proper due diligence to determine whether a person is fit to be a director or senior manager of such an entity. Board and top management positions are offered as rewards for political patronage.

There is need for us to look at ways of empowering the boards and managements of these entities by looking at their structure and independence. The central requisite in empowering such boards is to structure them in a way that they can effectively exercise objective and independent judgment.

And by independence, we mean the ability to make impartial decisions without fear or favour. Independence of judgment is an important contribution of a director to the board requiring that the aspect be taken into consideration in restructuring of the board.

The issues being raised by the Engineering Institute of Zambia on Mondoloka’s appointment as chairman of the Road Development Agency arise from concerns of independence. How can the chief executive of a firm that has a substantial consultancy with the Road Development Agency be its chairman? There is need for an independent chairman, that is, a non-executive director who has no business dealings or contracts with the Road Development Agency.

The appointment of directors of state-owned entities should not be aimed at influencing pursuit of political policy at the expense of interests of the Agency. Directors or senior managers who are appointed on the basis of political patronage usually exert direct and undue political interference in the way the entity is run and as such upset board and management dynamics.

Probably, it may also be important to strictly look at the appointment and dismissal of chief executives of state-owned enterprises. In Zambia today, the appointment and dismissal of chief executive officers and other key executives of government-owned entities are the prerogative of ministers.

But we all know that the power to hire and fire the chief executive officer is a key board competence and prerequisite to board effectiveness. It is therefore contradictory to charge the board with responsibility for the state-owned enterprises’ performance with no power to hire and fire executive management.

This political interference amounts to the usurpation of board powers by the politicians running government, who effectively set and drive the strategy of the state-owned enterprises; exercise oversight and monitor management, appoint and dismiss the chief executive officer and approve financial and major capital expenditure projects of the state enterprises.

With management dealing with the day-to-day activities, the role of the board is severely constrained. There is little accountability on the part of management to the board – board discussions are a formality. This results in limited power by the board to police and prevent abuses by management.

And today we have a lot of problems in some of our state-owned enterprises or statutory bodies because of poor clarification of objectives. For instance, as a result of poor clarification of objectives, there is a lot of tension between the Road Development Agency and the National Road Fund Agency. This poor clarification of objectives affords managers discretion to run the entities in their own interest; and allows abuse of discretion by government to meddle in the affairs of these entities for political gain.

There is need to address these state enterprise governance challenges by improving the nomination process and the way the chief executive and other key managers are appointed.

There is need to come up with a mechanism which will ensure that the ultimate selection criteria for the nomination of board members are competency-based. And the power to appoint and dismiss the chief executive officer and senior management should strictly be made a key function of the board; not the ministers, the politicians in control of government.

Independent boards require a sufficient number of independent directors free of conflict of interest who should predominantly be drawn from the private sector and civil society to make the entities more business-oriented. The directors selected should have the relevant competency and experience to the entity’s specific policy objectives. And there should be explicit prohibition of senior members of government or political parties from sitting on such boards.

The concerns raised by the Engineering Institute of Zambia over Mondoloka’s appointment as Road Development Agency chairman have raised important questions not only about corporate governance but also about the role of government-owned agencies and parastatals in our economy, their relationship with government and the ability of either national or corporate executives to define public policy. This confusion has as well raised questions about how seriously the government takes the issue of independence of the boards of government-owned entities.

Theoretically, these agencies or parastatals are enterprises, not government departments, and they should have independent boards with unfettered power to hire and fire chief executive officers and other key executives. In practice, legislation puts the relevant minister in charge of hiring and firing the chief executive officer. This has tended to create space for political jockeying.

This confusion has also been a product of ambivalence within government about the purpose of these top state-owned enterprises’ posts: should they provide great jobs and lots of power for the well connected, those the ruling party seeks to reward? Or should the incumbents be chosen simply on the basis that they are the best people to do jobs that are vital for the economy?

Though this government sometimes talks about efficiency and better services, there is a tendency to cronyism that surfaces in all sorts of areas of Zambian public life, and the tension may be bedeviling attempts to do right by the state-owned agencies or parastatals.

More profoundly, however, the governance troubles at the state-owned agencies or parastatals have been a symptom of a more generalised policy muddle about what the government wants these entities to do and how to get them to do it. As long as the government is not clear on just what kind of enterprise it wants, it is difficult to decide what kind of people should take leadership roles and how they should be selected.

Whether the confusion is about politics or about patronage is perhaps the more interesting, and disturbing, question.