THE current management struggles within two of Lesotho’s critical utility enterprises have been highlighted as a basis for need to develop a national code of corporate governance.
This was said by Finance Minister Moeketsi Majoro who noted that the two were just examples of how poorly public enterprises have been run for many years in the country without a defined corporate culture.
Dr Majoro said this at a recent media launch of a project to develop Lesotho’s code of good corporate governance which is expected to be completed by May 2019. The project will also be useful to private companies, public enterprises, civil society organisations and other institutions.
Dr Majoro said the poor management of Lesotho Electricity Company (LEC) and Water and Sewerage Company (WASCO) were indicative of the lack of a best practice culture in their operations.
Dr Majoro’s sentiments come after LEC managing director, Thabo Nkhahle was in December 2018 suspended along with finance manager Refiloe Pule and secretary Tembo Lesupi for maladministration.
WASCO’s chief executive officer (CEO) Lehlohonolo Manamolela was also suspended in June 2018 for irregularities in awarding a M460 million tender to a Chinese-owned company Unik Construction Engineering.
The project to develop the corporate code is led by the Institute of Directors Lesotho (IoD), which is a custodian of corporate governance in Lesotho.
The government, through financial assistance from the African Development Bank (AfDB) has bankrolled IoD to the tune of M900 000 for the exercise, which is expected to be completed by May 2019.
“This is happening because there are no laws and codes of good corporate governance in the country,” Dr Majoro said.
He said development of the corporate code would lead to compliance with best practices in future, which will in turn help to develop strong corporates that are able to contribute meaningfully to the country’s economy.
For his part, chief executive officer of IoD Lesotho, Lehlohonolo Chefa said apart from helping entities to make better decisions, the code also comes with other advantages.
“Lesotho has witnessed abuse of power by people who were entrusted to run state owned enterprises and in some cases such businesses ended up being privatised or closing shop due to poor corporate governance,” Mr Chefa said.
He said compliance with the code could later be incorporated as part of the requirements for companies interested to list on the Maseru Securities Market. This would compel such companies to adopt best governance practices.
He further said having the code that is adopted by many entities would also help to protect investors wishing to operate in the country.
“Where corporate governance is weak like in Lesotho, it is very challenging to protect the interests of stakeholders. One of the most important aspects of doing business is to ensure that businesses are run in a manner that the establishment objectives are reflected in the running of such an entity.”
Mr Chefa said the development the code has been inspired by the uninspiring rate at which many Basotho companies, whether private or public owned, have failed and closed down in the past.
He further said Lesotho is among few countries without their own corporate governance code, while its peers in the region such as Botswana, Malawi, Namibia, South Africa, Zambia and Zimbabwe have long developed theirs to improve their corporate governance culture.
“The corporate governance code will go a long way towards transforming the manner in which corporations and organisations operate in Lesotho.
“It is expected to be applicable across the board, from state owned enterprises, private companies, public companies, academic institutions, non-governmental organisations and many other institutions,” Mr Chefa said.
He further indicated that the code will be drafted by a task force made up from representatives of professional bodies, regulators, business associations, non-governmental organisations and independent experts.
“This is an important aspect of any corporate governance code as it is aimed at cultivating a culture in an economy. These are the people with wealth of experience in corporate governance in state entities, institutions of higher learning, non-governmental organisations, professional bodies, private companies and in listed companies.
“The diversity of task team members will ensure that different aspects of corporate governance are covered to come up with a code that will reflect their wealth of experience and address the challenges of organisations of the twenty first century.”
He added all interested parties would have an opportunity to review the code before it is finalised to ensure that it will have a buy in of as many stakeholders as possible.
“The good thing of having a national corporate governance code is that it is developed by people who know the challenges of doing business in that economy. It is also developed in a manner that it will take into consideration the norms and values that exist in that economy,” Mr Chefa said.