New proposed laws that should make CEOs and boards of state-owned companies nervous
The Organisation Undoing Tax Abuse (OUTA) has taken the government to court in a case that could change how executives and board members of state-owned entities (SOEs) are held accountable.
OUTA wants the Public Finance Management Act (PFMA) changed so that civil society can take legal action against SOE board members and executives who mismanage public money, even if their entities are not registered as companies.
At the moment, South African law only allows delinquent-director cases to be brought against directors of registered companies, including state-owned companies (SOCs) like Eskom, Transnet, and South African Airways.
However, many SOEs are not registered as companies, meaning their board members are protected from these types of legal actions.
“This legal gap means that the accounting authorities of SOEs that are not registered companies are automatically protected from delinquency actions,” said Advocate Stefanie Fick, Executive Director of OUTA’s Accountability Division.
“That is unfair, because it holds them to a lower standard of accountability than directors of SOCs.”
OUTA’s case, filed in the Pretoria High Court on 20 August 2025, argues that sections 83(4) and 84 of the PFMA are unconstitutional because they provide weaker consequences for financial misconduct.
Under the PFMA, financial misconduct can result in dismissal, suspension, or other unspecified sanctions. In contrast, the Companies Act forces a court to declare a director delinquent if they are found to have failed in their duties.
“Under section 162 of the Companies Act, a court must declare a company director delinquent if the director has failed to discharge their duties,” said Fick. “The PFMA, on the other hand, only offers vague disciplinary options. This difference undermines accountability.”
The case names the Minister of Finance, the Minister of Trade, Industry and Competition, the Department of Trade, Industry and Competition, and the Companies and Intellectual Property Commission (CIPC) as respondents.
OUTA is represented by Advocate Niël du Preez SC and Advocate Sonika Mentz, with attorney Andri Jennings of Jennings Inc.
OUTA is asking the court to declare these PFMA sections unconstitutional and to give Parliament two years to fix the law.
Incompetent officials recycled through government departments and entities
In the meantime, the organisation wants the court to order that section 162 of the Companies Act, which allows delinquency actions, apply to all accounting authorities of public entities, not just registered companies.
If Parliament fails to fix the law within two years, OUTA wants this interim arrangement to remain in place.
Fick said the distinction between SOCs and other SOEs is unjustifiable and violates constitutional rights to equality, access to courts, and the values of transparency and accountability.
“Public entities are required to operate under these values, but the current legal framework allows some of them to escape proper scrutiny,” she said.
According to OUTA, this gap in the law has real consequences. Individuals involved in misconduct at SOEs that are not registered as companies can simply move into new senior positions in other government entities without facing any accountability.
“Compromised officials are repeatedly recycled through government departments and entities,” said Fick. “By fixing this gap in the law, we can give civil society another tool to hold such individuals to account and protect the public purse.”
OUTA has already shown how effective delinquent-director actions can be. In 2020, the organisation successfully had former South African Airways chairperson Dudu Myeni declared a delinquent director for life.
This ruling was confirmed by the Supreme Court of Appeal in 2021 and was possible because SAA is a registered company governed by the Companies Act.
“Had Myeni been an accounting authority of an SOE not registered as a company, this remedy would not have been available to OUTA,” said Fick.
“Most likely, she would not have been held accountable for her gross abuse of office and the enormous damage she caused.”
OUTA recently filed a similar case against former Johannesburg Property Company CEO Helen Botes for her role in the Usindiso building fire tragedy and Covid-19 procurement scandals. This case is possible because the JPC is also a registered company.
However, OUTA has been unable to take similar action against individuals implicated in wrongdoing at the Services Sector Education and Training Authority (Services SETA) and the National Student Financial Aid Scheme (NSFAS), as neither is a registered company.
“If Services SETA and NSFAS were SOCs, the public and OUTA would have recourse under the Companies Act. But under the PFMA, the public has none,” said Fick.
If successful, the outcome of OUTA’s court challenge could close a major loophole in the law and make it possible to hold executives and board members of all SOEs personally accountable for misconduct.
“This is about fairness and accountability. If the government fails to hold corrupt officials to account, civil society must have the tools to do so. Public money must be protected, and those who abuse it must face real consequences,” said Fick.
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