Heads Up SOE Boards!

OUTA is going to court to get the Public Finance Management Act (PFMA) changed so that “delinquent director” actions may be brought against malfeasant members of boards of all state-owned entities (SOEs), not only of those SOEs registered as companies.

The Companies Act, which enables delinquent-director actions, applies only to entities which are registered companies. The SOEs which are not registered as companies fall under the PFMA, where a “lacuna” exists in law which prevents their accounting authorities from being declared delinquent.

Some SOEs are registered companies, and are referred to as state-owned companies (SOCs). However, accounting authorities of SOEs that fall outside the ambit of the Companies Act are automatically protected from delinquency actions.

OUTA believes this is unfair, as it limits actions to hold SOE management to account, effectively holding SOE accounting authorities to lower standards than those of SOCs.

What OUTA asks the court

OUTA’s action was filed on 20 August 2025 in the Pretoria High Court. The founding affidavit is made by Advocate Stefanie Fick, OUTA’s Executive Director of the Accountability Division.

OUTA is asking the court to declare sections 83(4) and 84 of the PFMA unconstitutional, because they impose a lower standard of accountability on the boards of the SOEs which are not registered as companies, compared to SOCs.

OUTA asks that the court allows Parliament two years to amend the PFMA. However, pending that legal fix, OUTA asks the court to order that section 162 of the Companies Act (which enables delinquency actions) applies to all accounting authorities of all public entities, regardless of whether they are registered as companies. If Parliament fails to fix the law within two years, then OUTA asks for the interim application of the Companies Act to continue to apply.

The parties

The applicant is OUTA.

The respondents are the Minister of Finance (responsible for the administration of the PFMA), the Minister of Trade, Industry and Competition (responsible for the administration of the Companies Act), the Department of Trade, Industry and Competition, and the Companies and Intellectual Property Commission (CIPC).

OUTA is represented by Advocate Niël du Preez, SC, and Advocate Sonika Mentz, instructed by attorney Andri Jennings of Jennings Inc.

The gap (the “lacuna”)

OUTA’s case argues that there is a “gap” or, in legal terms, a “lacuna”, in the PFMA regarding delinquency. OUTA’s case aims to fix that lacuna.

Section 83(4) of the PFMA provides that financial misconduct may be grounds for dismissal or suspension, or “other sanction”. Section 84 of the PFMA provides for the applicable legal regime for disciplinary proceedings. “The only sanctions for financial misconduct are dismissal, suspension, or undefined ‘sanctioning’,” said Fick in her affidavit.

“Under section 162 of the Companies Act, a court must (the court has no discretion) declare a company director delinquent if the director has failed to discharge a director’s duties under the Companies Act,” said Fick.

Why OUTA wants the PFMA changed

OUTA believes that the different – and lower – standard for accountability provided by the PFMA compared to the Companies Act is unreasonable, as it limits actions for accountability.

It also limits civil society action against corrupt SOE heads. If government fails to hold malfeasant board members, CEOs and CFOs of SOEs to account, then civil society wants the tools to do this.

“Specifically, the application will focus on the fact that the remedy of declaring a director of a state-owned entity registered under the Companies Act delinquent is available to public interest litigants such as OUTA, whereas there is no equivalent remedy against accounting authorities of public entities that are not registered under the Companies Act,” said Fick in her affidavit.

“This distinction is unjustifiable and violates the constitutional rights of equality and access to courts, as well as the constitutional values of accountability and transparency that public entities are required to hold.”
This loophole means that individuals involved in financial misconduct in SOEs that are not companies can simply move on to other senior roles in government entities, with no consequence or public recourse.

Compromised officials are repeatedly recycled through government departments and entities. By fixing this gap in the law, OUTA aims to provide civil society with another tool to hold such individuals to account and protect the public purse.

SAA and JPC vs the Services SETA and NSFAS

In May 2020, OUTA won a high court order which declared former South African Airways (SAA) chair Dudu Myeni a delinquent director for life, which was confirmed by the Supreme Court of Appeal in April 2021 (see here). This action was possible because SAA is a registered company, which falls under the Companies Act. SAA is not meant to be funded by taxpayers, but has received repeated bailouts over the years due to financial mismanagement. This case set a precedent, the first delinquency action against an SOC director and the first brought by civil society.

“Had Myeni been an accounting authority of an SOE not registered as a company, this remedy would not have been available to OUTA. Mostly likely, she would not have been held accountable for her gross abuse of office and breach of her fiduciary duties during her tenure at SAA and for the enormous damage she caused,” said Fick.

OUTA’s delinquency case against the former Joburg Property Company CEO, Helen Botes, filed in the Johannesburg High Court in August 2025 over her failures that contributed to the fatal Usindiso fire and her role in Covid-19 procurement scandals, is possible because JPC is a registered company (see here).

OUTA has also found significant corruption at the Services Sector Education and Training Authority (Services SETA) and the National Student Financial Aid Scheme (NSFAS). However, none of these entities are SOCs, so delinquency actions cannot be brought against them.

“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.