Geraldo Johnson

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Contents
Task 1 Questions A (Marked).........................................................................................................2
Task 1 Question A (Corrections).................................................................................................10
Task 2 Question B (Marked).........................................................................................................15
Task 2 Question B (Corrections).................................................................................................19
Question 2........................................................................................................................................23
Question 2.1.................................................................................................................................23
Question 2.2.................................................................................................................................25
Question 3........................................................................................................................................27
Bibliography.....................................................................................................................................31
Rubrics..............................................................................................................................................32
Task 1 Questions A (Marked)
1
Task 1 Question A (Corrections)
Question 1
1 Introduction
Corporate governance plays an essential role in guiding organizations toward sustainable
success and ensuring accountability to stakeholders. 1The lack of strong governance
structures can lead to failures that harm not only the company but also society and the
environment. 2One of the most tragic examples of corporate governance failure is BP’s
Deepwater Horizon oil spill in April 2010, which caused extensive damage to the Gulf of
Mexico. 3The oil spill resulted in the deaths of 11 workers, massive harm to marine life, and
long-term ecological damage. BP's inability to prevent or immediately contain the spill
exposed serious weaknesses in its governance structure. 4This essay will explore these
governance failures, referencing the "fish rots from the head" argument to emphasize the
importance of leadership in corporate governance. By applying the principles of King IV, we
will analyse how BP could have managed risks more effectively, maintained transparency,
and upheld ethical performance to avoid disaster.
2 Corporate Governance: The "Fish Rots from the Head" Argument
Corporate governance is a system of rules, practices, and processes by which a company is
controlled and directed. 5At the heart of good corporate governance lies ethical leadership,
transparency, and accountability.6 As the saying goes, "a fish rots from the head," meaning
that leadership plays a critical role in determining the overall governance and culture of an
organization. 7When the board and executive management fail to prioritize governance, the
consequences cascade down the organization, creating vulnerabilities that can lead to
crises.8
In the context of good corporate governance, leadership must set the tone for responsible
and ethical decision-making.9 This involves promoting a culture of transparency, ensuring
robust risk management systems, and maintaining accountability to all stakeholders.10
Companies that practice good governance are able to manage risks effectively, engage with
stakeholders openly, and prioritize long-term sustainability over short-term gains. 11 On the
other hand, poor corporate governance occurs when leadership prioritizes profit over safety,
fails to address risks, and disregards the impact of the company's operations on the broader
community.12 This was clearly the case with BP, where poor decision-making at the highest
levels contributed to the environmental disaster.13

1
Mendra, Y"Good corporate governance, corporate social responsibility, and sustainability report to firm
value."2021 International Journal of Environmental, Sustainability, and Social Science (2) 17-21.
2
Mendra 2021 International Journal of Environmental, Sustainability, and Social Science 17-21.
3
Brennan, K “A Stakeholder Analysis of the BP Oil Spill and the Compensation Mechanisms Used to
Minimize Damage” https://www.usf.edu/business/documents/undergraduate/honors/thesis-
brennan-katelyn.pdf November 2013. [Accessed 16 September 2024]
4
Brennan, “A Stakeholder Analysis of the BP Oil Spill and the Compensation Mechanisms Used to
Minimize Damage”.
5
Lozano, M "Corporate governance, ownership, and firm value." 2016 International Business Review (25) 1333-1343.
6
Sidani, Y "A view of the learning organization from a corporate governance perspective: Interview with Bob Garratt." 2018 The
Learning Organization (25) 434-442.
7
Sidani 2018 The Learning Organization 434-442.
8
Sidani 2018 The Learning Organization 434-442
9
Gandz, J "Leadership character, and corporate governance." 2013 Journal of the Institute of Corporate Directors (167) 15-21.
10
Gandz 2013 Journal of the Institute of Corporate Directors 15-21.
11
Gandz 2013 Journal of the Institute of Corporate Directors 15-21.
12
Gandz 2013 Journal of the Institute of Corporate Directors 15-21.
3 King IV Principles
The King IV Report on Corporate Governance, which outlines best practices for governance,
offers valuable insights into what BP’s leadership could have done differently. King IV
emphasizes ethical leadership, risk governance, transparency, and stakeholder inclusivity as
cornerstones of good governance.14 These principles provide a framework for understanding
the failures at BP and how they could have been avoided.15
King IV’s Principle 1 highlights the importance of ethical leadership in promoting responsible
business practices. Principle 2 mandates that the governing body of an organization
establish and promote an ethical culture. 16An ethical culture at BP would have supported a
more cautious approach to deep-water drilling, one that rigorously assessed operational
risks and prioritized safety over cost-cutting measures. 17Principle 3 emphasizes that the
governing body should ensure the organization acts as a responsible corporate citizen,
holding itself accountable not only to shareholders but to the broader community and
environment. BP’s disregard for environmental impact, demonstrated by inadequate safety
measures and lack of responsiveness to warning signs, reflects a failure in this regard. 18
Finally, Principle 4 advocates for integrated thinking, stressing that an organization should
understand its role within society and recognize the interconnectedness of its operations with
societal and environmental factors.19 BP’s focus on short-term profit rather than long-term
value undermined this principle, as the board did not adequately weigh the environmental
and social consequences of its activities. By aligning with these foundational King IV
principles, BP’s leadership could have built a governance framework that emphasized ethical
responsibility, transparency, and sustainable decision-making.
4 The BP Oil Spill: Application of Corporate Governance Principles
The BP oil spill offers a clear example of how poor corporate governance can lead to
devastating consequences. 20By examining the key areas of risk management, transparency,
and ethical performance, we can identify the specific governance failures that contributed to
the disaster and how adherence to the King IV principles could have prevented it.
41 Risk Management
Risk management is a fundamental aspect of corporate governance, particularly in high-risk
industries such as oil and gas.21 BP’s failure to manage the risks associated with deep-water
drilling was a critical governance lapse that led to the Deepwater Horizon explosion and oil
spill. 22There were several warning signs that BP ignored, including issues with the blowout
preventer and the overall construction of the well. BP’s leadership was more focused on

13
Brennan, “A Stakeholder Analysis of the BP Oil Spill and the Compensation Mechanisms Used to
Minimize Damage”.
14
Padayachee, V "King IV is here: corporate governance in SA revisted." 2017 New Agenda: South African Journal of Social
and Economic Policy (66) 17-21.
15
Padayachee 2017 New Agenda: South African Journal of Social and Economic Policy 17-21.
16
Padayachee 2017 New Agenda: South African Journal of Social and Economic Policy 17-21.
17
Padayachee 2017 New Agenda: South African Journal of Social and Economic Policy 17-21.
18
Ibid.
19
Ibid
20
Brennan, “A Stakeholder Analysis of the BP Oil Spill and the Compensation Mechanisms Used to
Minimize Damage”.
21
Brennan, “A Stakeholder Analysis of the BP Oil Spill and the Compensation Mechanisms Used to
Minimize Damage”.
22
Brennan, “A Stakeholder Analysis of the BP Oil Spill and the Compensation Mechanisms Used to
Minimize Damage”.
cost-cutting and operational efficiency than on ensuring safety, which ultimately contributed
to the disaster.23
A robust risk management system would have allowed BP to identify the potential dangers of
deep-water drilling and take the necessary precautions to prevent the spill. 24 This would
have included conducting regular risk assessments, investing in safety technology, and
developing a comprehensive disaster response plan. 25According to King IV’s Principle 11,
BP’s board of directors should have ensured that a comprehensive risk management
framework was in place, regularly reviewed, and updated to mitigate potential risks. 26
However, BP failed to prioritize risk governance, which led to the catastrophe in the Gulf of
Mexico.
42 Transparency
Transparency, a core tenet of Principle 15, further underscores the need for openness in
communicating risks to.27 BP did not fully disclose the risks associated with its operations to
regulators or the public, thereby preventing proper oversight and intervention. 28 Even after
the spill began, BP delayed providing accurate information about the severity of the situation.
29
This lack of transparency directly violated King IV’s Principle 15, which stresses the
importance of open and honest communication with stakeholders.
Transparency is essential for building trust and ensuring accountability. 30 If BP had been
more transparent about the risks and challenges involved in its deep-water drilling
operations, regulators could have imposed stricter safety requirements, possibly preventing
the disaster.31 Furthermore, had BP been forthright about the extent of the spill once it
occurred, it could have facilitated a more coordinated and effective response from regulators
and environmental agencies, potentially limiting the damage.32
43 Ethical Performance
Ethical performance is at the heart of good corporate governance, and BP’s leadership failed
in this regard. 33Ethical governance requires leaders to act in the best interests of society
and the environment, not just for the sake of immediate financial gain. 34 BP’s decision to
prioritize short-term profits over long-term sustainability was a clear breach of ethical
leadership35, as outlined in King IV’s Principle 1.36

23
Arora, M "The BP Gulf of Mexico oil spill: Exploring the link between social and environmental disclosures and reputation risk
management." 2017 Journal of Cleaner Production (140) 1287-1297.
24
Arora 2017 Journal of Cleaner Production 1287-1297.
25
Arora 2017 Journal of Cleaner Production 1287-1297.
26
Padayachee, 2017 New Agenda: South African Journal of Social and Economic Policy 17-21.
27
Padgett, D "The quest for transparency and accountability: Communicating responsibly to stakeholders in crises."2013 Asian
Social Science (9) 31.
28
Brennan, “A Stakeholder Analysis of the BP Oil Spill and the Compensation Mechanisms Used to
Minimize Damage”.
29
Brennan, “A Stakeholder Analysis of the BP Oil Spill and the Compensation Mechanisms Used to
Minimize Damage”.
30
Padgett 2013 Asian Social Science 31.
31
Brennan, “A Stakeholder Analysis of the BP Oil Spill and the Compensation Mechanisms Used to
Minimize Damage”.
32
Padgett 2013 Asian Social Science 31.
33
Lin‐Hi, N "The relationship between corporate governance, global governance, and sustainable profits: lessons learned from
BP." 2011 Corporate Governance: The international journal of business in society (11) 571-584.
34
Lin‐Hi, N 2011 Corporate Governance: The international journal of business in society 571-584.
35
Lin‐Hi, N 2011 Corporate Governance: The international journal of business in society 571-584.
36
Padayachee, V 2017 New Agenda: South African Journal of Social and Economic Policy 17-21
BP’s leadership failed to create a corporate culture that valued ethical conduct, safety, and
environmental protection.37 Instead, cost-cutting measures and profit-driven decisions led to
the neglect of safety protocols, resulting in the loss of lives and extensive environmental
harm. 38Ethical leadership would have required BP’s executives to prioritize safety and
environmental sustainability, ensuring that their actions aligned with the company’s broader
responsibilities to society.
5 Conclusion
The BP oil spill serves as a poignant reminder of the dangers of poor corporate governance.
Leadership failures at BP, including inadequate risk management, a lack of transparency,
and a disregard for ethical performance, were central to the disaster. Adherence to the King
IV principles could have provided the framework needed to prevent or mitigate the effects of
the spill. In particular, BP should have implemented more robust risk management practices,
ensuring that safety protocols were followed and that potential risks were properly mitigated.
Additionally, greater transparency with regulators and stakeholders would have facilitated
better oversight and a more coordinated response to the crisis.
Good governance must be embedded in the organizational culture, with leadership setting
the tone for ethical behavior, transparent communication, and a commitment to long-term
sustainability. 39The lessons learned from the BP oil spill highlight the importance of adopting
best practices in corporate governance to ensure that companies fulfill their responsibilities
to all stakeholders, including the environment.40

37
Brennan, “A Stakeholder Analysis of the BP Oil Spill and the Compensation Mechanisms Used to
Minimize Damage”.
38
Brennan, “A Stakeholder Analysis of the BP Oil Spill and the Compensation Mechanisms Used to
Minimize Damage”.
39
Lin‐Hi, N 2011 Corporate Governance: The international journal of business in society 571-584.
40
Lin‐Hi, N 2011 Corporate Governance: The international journal of business in society 571-584.
Bibliography
Journal articles
Arora, M "The BP Gulf of Mexico oil spill: Exploring the link between social and
environmental disclosures and reputation risk management." 2017 Journal of Cleaner
Production (140) 1287-1297.

Gandz, J "Leadership character, and corporate governance." 2013 Journal of the Institute of
Corporate Directors (167) 15-21.

Lin‐Hi, N "The relationship between corporate governance, global governance, and

sustainable profits: lessons learned from BP." 2011 Corporate Governance: The international
journal of business in society (11) 571-584.

Lozano, M "Corporate governance, ownership, and firm value." 2016 International Business
Review (25) 1333-1343.
Mendra, Y"Good corporate governance, corporate social responsibility, and sustainability
report to firm value."2021 International Journal of Environmental, Sustainability, and Social
Science (2) 17-21.
Padayachee, V "King IV is here: corporate governance in SA revisted." 2017 New Agenda:
South African Journal of Social and Economic Policy (66) 17-21.
Sidani, Y "A view of the learning organization from a corporate governance perspective:
Interview with Bob Garratt." 2018 The Learning Organization (25) 434-442.

Websites
Brennan, K “A Stakeholder Analysis of the BP Oil Spill and the Compensation Mechanisms
Used to Minimize Damage”
https://www.usf.edu/business/documents/undergraduate/honors/thesis-brennan-katelyn.pdf
November 2013. [Accessed 16 September 2024]
Task 2 Question B (Marked)
Task 2 Question B (Corrections)
Question 1.B
21 Introduction
Scarlet, a shareholder in Weldon Ltd, has raised concerns regarding a proposed merger with
Banala Ltd, a Mpumalanga-based forestry company embroiled in an environmental scandal.
Weldon Ltd has been committed to a "go-green" initiative, and Scarlet believes the merger
would undermine these values. As a result, Scarlet is against the merger and seeks advice
on how she can exit the company by receiving fair value for her shares. This essay will guide
Scarlet on the process she must follow to exercise her appraisal rights, focusing on the
applicable legal framework in South Africa, particularly Section 164 of the Companies Act 41 ,
which governs share buybacks in specific instances like mergers. The essay will define what
a share is, explore the relevant appraisal rights, and outline the necessary steps for Scarlet
to ensure a fair outcome.
22 Definition of a Share and Relevance to the Case
A share represents a unit of ownership in a company. 42When an individual, like Scarlet,
purchases shares in a company, they become a part-owner of the company and gain
specific rights, including the right to vote on certain decisions, receive dividends, and access
information. 43More importantly, in certain circumstances, shareholders can exercise
appraisal rights to dissent from corporate actions, such as mergers or acquisitions, and
demand fair value for their shares. 44This right is especially relevant when a shareholder
believes that a corporate decision, like the proposed merger with Banala Ltd, is detrimental
to their interests.
Shares confer both economic and voting rights, meaning that shareholders have a say in the
company’s direction and can influence key decisions. 45 However, if Scarlet’s dissenting
opinion is outvoted, she still has the right to exit the company and receive compensation for
her shares, provided she follows the process set out by the Companies Act.46
23 Exercising Appraisal Rights: Section 164 of the Companies Act
Under South African corporate law, Section 164 of the Companies Act 39 grants shareholders,
like Scarlet, the right to dissent from certain corporate decisions, such as mergers, and
request the company to buy back their shares at fair value. This process is known as the
exercise of appraisal rights. 47Section 16441 is particularly useful in protecting minority
shareholders who disagree with significant corporate actions.

24 For Scarlet to successfully exercise her appraisal rights, she must follow a
prescribed process:

41
Act 71 of 2008.
42
Gordon, S “What Are Shares? How They Compare to Stocks”
https://www.investopedia.com/terms/s/shares.asp{ Accessed 14/10/2024}
43
Esser, I "Shareholder interests and good corporate governance in South Africa." 2014 THRHR (77) 38.
44
Esser 2014 THRHR (77) 38.
45
Esser 2014 THRHR (77) 38.
46
Act 71 of 2008. 39
Act 71 of 2008.
47
Yeats, J "Putting appraisal rights into perspective." 2014 Stellenbosch Law Review (25) 328-342. 41
Act 71 of 2008.
Dissent Before the Vote: Scarlet must formally object to the proposed merger resolution in
writing before it is voted on at the special general meeting. 48 This written objection is crucial
to preserving her appraisal rights under Section 164(3). 49 If she fails to submit a formal
objection before the vote, she forfeits the right to demand a buyback of her shares.
Voting Against the Resolution: During the meeting, Scarlet must vote against the merger
resolution.50 If the majority of shareholders vote in favor of the merger and the resolution
passes, Scarlet may still exercise her appraisal rights, provided she has followed the
necessary steps. It is important for Scarlet to note that her appraisal rights can only be
exercised if she votes against the merger, as the law is designed to protect shareholders
who actively dissent from significant corporate decisions.51
Demanding Fair Value for Shares: After the resolution is passed, Scarlet must formally notify
Weldon Ltd in writing that she demands fair value for her shares. 46 In her demand, Scarlet
must specify that she is exercising her rights under Section 164 and expects the company to
buy back her shares at fair value.52
Negotiation of Fair Value: Once Scarlet has submitted her demand, Weldon Ltd is required
to make an offer to buy back her shares at what the company considers fair value. 53 If
Scarlet disagrees with the company’s valuation, she may reject the offer and request an
independent valuation. Section 164(14)54 allows for an application to court if there is a
dispute about the fair value, and the court may appoint a third-party expert to determine a
fair price for Scarlet’s shares.
25 The Solvency and Liquidity Test: Section 4 of the Companies Act
Before Weldon Ltd can proceed with buying back Scarlet’s shares, the company must pass
the solvency and liquidity test, as outlined in Section 4 of the Companies Act. 50 This test
ensures that the company is in a financial position to repurchase shares without
compromising its financial health or the interests of its creditors.55

Solvency: Weldon Ltd must demonstrate that after repurchasing Scarlet’s shares, its total
assets will exceed its liabilities. This ensures that the company remains financially viable and
able to meet its obligations.56

48
Phakeng, M "The Appraisal Right in terms of Section 164 of the Companies Act 71 of 2008: An Overview"
2022 PER / PELJ (25) 5.
49
Act 71 of 2008.
50
Phakeng 2022 PER / PELJ (25) 5.
51
Phakeng 2022 PER / PELJ (25) 5. 46
S 164(5) of Act 71 of 2008.
52
Phakeng 2022 PER / PELJ (25) 5.
53
S 164(14) of Act 71 of 2008.
54
Act 71 of 2008. 50
Act 71 of 2008.
55
Mudzamiri, J "An Appraisal of the Application and Soundness of the Solvency and Liquidity Test in the
Implementation of Statutory Mergers."2024 Journal for Juridical Science (49) 77-100.
56
Mudzamiri 2024 Journal for Juridical Science (49) 77-100.
Liquidity: Weldon Ltd must also prove that after repurchasing the shares, it will still be able
to pay its debts as they fall due over the next 12 months. This is crucial to ensure that the
share buyback does not jeopardize the company’s cash flow or operational capacity.57
If Weldon Ltd passes both the solvency and liquidity tests, it may proceed with buying back
Scarlet’s shares. If the company fails these tests, it may not lawfully repurchase the shares,
and Scarlet would have to retain her shares or explore other options.
26 Judicial Intervention and Section 164(15)(c)
Section 164(15)(c)58 provides that if there is a dispute regarding the solvency and liquidity
requirements or other aspects of the appraisal process, Scarlet may apply to a court to
compel Weldon Ltd to act in accordance with its obligations under Section 164. This
provision empowers shareholders to seek judicial intervention when a company fails to
comply with procedural or financial standards required by law. 59Courts, when presented with
such cases, consider both the financial health of the company and whether the buyback
could threaten its operational integrity.60
26 Conclusion
Scarlet’s opposition to Weldon Ltd’s proposed merger with Banala Ltd due to environmental
concerns can be effectively addressed through the exercise of her appraisal rights. Section
164 of the Companies Act54 provides Scarlet with the legal framework to dissent from the
merger and demand fair value for her shares. To do so, she must formally object to the
resolution, vote against it, and submit a demand for the buyback of her shares within the
prescribed timeframes. Additionally, Weldon Ltd must pass the solvency and liquidity test
before proceeding with the share buyback. Section 164(15)(c) underscores the law’s
commitment to ensuring that appraisal rights are exercised fairly and transparently, providing
judicial recourse if Weldon Ltd fails to meet its obligations.61By following these steps, Scarlet
can ensure that her exit from the company is conducted fairly and in accordance with South
African corporate law.

Bibliography
57
Mudzamiri 2024 Journal for Juridical Science (49) 77-100. 54
Act 71 of 2008.
58
Act 71 of 2008.
59
Mudzamiri 2024 Journal for Juridical Science (49) 77-100.
60
Mudzamiri 2024 Journal for Juridical Science (49) 77-100.
61
Act 71 of 2008.
Legislation
Companies Act 71 of 2008.
Journal articles
Esser, I "Shareholder interests and good corporate governance in South Africa." 2014
THRHR (77) 38.
Mudzamiri, J "An Appraisal of the Application and Soundness of the Solvency and Liquidity
Test in the Implementation of Statutory Mergers."2024 Journal for Juridical Science (49) 77-
100.

Phakeng, M "The Appraisal Right in terms of Section 164 of the Companies Act 71 of 2008:
An Overview" 2022 PER / PELJ (25) 5.
Yeats, J "Putting appraisal rights into perspective." 2014 Stellenbosch Law Review (25)
328-342.
Websites
Gordon, S “What Are Shares? How They Compare to Stocks”
https://www.investopedia.com/terms/s/shares.asp{ Accessed 14/10/2024}
Question 2
Question 2.1
Introduction
The persistent underperformance of state-owned enterprises (SOEs) in South Africa has had
severe consequences for the nation’s economy. 62This inefficiency has been attributed to
various factors that continue to hamper the productivity and financial stability of these
entities.63 Among the most prominent causes are ethical lapses, corruption, political
interference, inadequate oversight, and inefficient governance structures.64
Lack of Ethical Standards and Moral Norms
A lack of moral norms within South African SOEs has fostered an environment where ethical
conduct is compromised. Leaders within these entities often neglect ethical obligations, with
a focus on personal gain or organizational power rather than accountability. 65 This disregard
for ethical standards trickles down the hierarchy, setting a dangerous precedent for
employees and impacting overall performance. 66Without a foundation of ethical behaviour,
SOEs struggle to maintain transparency, leading to decisions that often conflict with public
interest and financial responsibility.67
Widespread Corruption
Corruption is one of the primary reasons behind the financial distress facing SOEs. 68
Corruption in South African SOEs has manifested in various ways, including inflated
procurement processes, fraudulent contracts, and improper financial reporting. 69 Such
corruption is often perpetrated by senior officials or executives, frequently with connections
to influential political figures, who manipulate procedures for personal enrichment. 70This
corrupt culture not only depletes resources but also diminishes the public’s trust in SOEs,
making recovery and future investments more challenging.71
Political Interference and Patronage
SOEs in South Africa have also suffered from extensive political interference, often leading
to appointments based on loyalty rather than competence. 72 Many senior positions within
SOEs are filled by politically connected individuals with little regard for their expertise or
experience in managing large public institutions. 73This patronage system reinforces

62
Thabane, T "Corporate Governance Deficiencies in South Africa's State-Owned Companies: A Critical
Reflection." 2018 Potchefstroom Electronic Law Journal (21) 1-31.
63
Thabane 2018 Potchefstroom Electronic Law Journal 1-31.
64
Thabane 2018 Potchefstroom Electronic Law Journal 1-31
65
Masianoga, E “Ethical leadership and employee creative behaviour: a case study of a state-owned enterprise
in South Africa." 2023 International Journal of Professional Business Review: Int. J. Prof. Bus. (8) 3- 22.
66
Masianoga 2023 International Journal of Professional Business Review: Int. J. Prof. Bus. 3- 22.
67
Masianoga 2023 International Journal of Professional Business Review: Int. J. Prof. Bus. 3- 22.
68
Mbele, N Corporate governance in state-owned enterprises. (Wits School of Governance: University of
Witwatersrand) 2015 6.
69
Mbele, N Corporate governance in state-owned enterprises. (Wits School of Governance: University of
Witwatersrand) 2015 6.
70
Mbele, N Corporate governance in state-owned enterprises. (Wits School of Governance: University of
Witwatersrand) 2015 7.
71
Ibid.
72
Motswaledi, T "An Examination of Political Patronage and Maladministration on State-Owned Entities with
Specific Reference to South African Airways: A Literature Study." 2024 J. Pol. & L. (17) 74.
73
Motswaledi 2024 J. Pol. & L. 74.
inefficiency and perpetuates corruption, as these individuals may lack the necessary skills
and independence to make sound business decisions.74
Inadequate Oversight and Accountability Mechanisms
The governance structure of South African SOEs frequently lacks adequate oversight and
accountability.75 Boards and executive bodies often fail to hold individuals accountable for
mismanagement or failures to meet performance targets. 76This absence of robust oversight
allows inefficiencies to persist, with little consequence for those responsible. 77Moreover,
without effective oversight, public funds are often misused, as there is no mechanism in
place to check spending, leading to escalating debt and poor service delivery.78
Inefficient Governance and Management Structures
Inefficient governance frameworks contribute to the operational struggles faced by SOEs. 79
These frameworks often lack clear lines of authority, with overlapping responsibilities that
hinder swift decision-making. In addition, many SOEs do not employ management practices
that align with corporate best practices, contributing to a lack of strategic direction and
operational inefficiency. 80The absence of performance-based incentives and
professionalized leadership further exacerbates these inefficiencies, as employees are not
encouraged to prioritize productivity or innovation.81
Conclusion
The underperformance of South Africa’s SOEs can be attributed to several structural and
governance-related issues, including ethical lapses, corruption, political interference,
inadequate oversight, and inefficient management practices.82 These issues not only weaken
the financial sustainability of SOEs but also place a significant strain on the South African
economy.

74
Motswaledi 2024 J. Pol. & L. 74.
75
Masianoga 2023 International Journal of Professional Business Review: Int. J. Prof. Bus. 3- 22.
76
Masianoga 2023 International Journal of Professional Business Review: Int. J. Prof. Bus. 3- 22.
77
Masianoga 2023 International Journal of Professional Business Review: Int. J. Prof. Bus. 3- 22.
78
Masianoga 2023 International Journal of Professional Business Review: Int. J. Prof. Bus. 3- 22.
79
Thabane 2018 Potchefstroom Electronic Law Journal 1-31.
80
Thabane 2018 Potchefstroom Electronic Law Journal 1-31.
81
Thabane 2018 Potchefstroom Electronic Law Journal 1-31.
82
Thabane 2018 Potchefstroom Electronic Law Journal 1-31.
Question 2.2

Geraldo Johnson
1 Disa Cresent
Cape Town
Western Cape
7446
0812684389

His Excellency, President Cyril Ramaphosa

15 Camp Street
Pretoria
0001

06 November 2024
Dear Honourable President Ramaphosa,
Subject: Strategic Advice for Revitalizing State-Owned Enterprises in South Africa
I am writing to offer strategic guidance and solutions to address the persistent challenges
facing South Africa’s state-owned enterprises (SOEs). The issues within our SOEs are
substantial and continue to place strain on both the economy and public resources. Despite
previous reform efforts, SOEs still grapple with challenges related to corruption, ineffective
governance, and financial mismanagement.83 Here, I present a series of recommendations
based on governance principles that can drive meaningful change in our SOEs.
1 Strengthening Ethical Standards and Accountability in Leadership
A key issue within SOEs is the lack of adherence to ethical standards, which has led to
entrenched corruption and self-serving practices among some senior officials. 84 Building a
strong ethical framework is vital for restoring public trust and aligning SOEs with the public
interest.85 Implementing a strict code of ethics that sets clear expectations across all
governance levels is essential. To uphold accountability, all board members and executives
should participate in regular ethical compliance training and be evaluated based on their
commitment to these standards. Violations of ethical guidelines must have direct
consequences, such as removal from office and legal action where warranted.
2 Appointing Competent and Independent Board Members
83
Thabane 2018 Potchefstroom Electronic Law Journal 1-31.
84
Masianoga 2023 International Journal of Professional Business Review: Int. J. Prof. Bus. 3- 22.
85
Masianoga 2023 International Journal of Professional Business Review: Int. J. Prof. Bus. 3- 22.
Political interference and patronage have weakened the functionality of SOE boards. 86To
counter this, board appointments should be merit-based, focusing on individuals with the
technical expertise and independence to make objective decisions. 87 Establishing a
transparent, independent appointment process will help curb political patronage, ensuring
boards are composed of qualified, committed individuals who align with the SOE’s mission
and the public interest.88
3 Enhancing Oversight and Implementing Performance-Based Evaluation
Effective boards require rigorous oversight to hold executives accountable for achieving
strategic and financial goals.89 A performance-based evaluation system should link executive
remuneration to measurable, pre-defined metrics like financial sustainability, service quality,
and operational efficiency. 90By connecting compensation to results, SOE boards can foster
a culture of accountability focused on delivering concrete outcomes that benefit both the
SOE and the public.91
4 Instituting Transparent Financial Management Practices
Financial mismanagement and unclear procurement processes have undermined financial
stability in SOEs. 92Introducing stringent financial controls and adopting best procurement
practices are essential.93 Establishing a robust auditing system, with regular independent
audits by external auditors, will enhance transparency and prevent wasteful spending. 94

Revitalising South Africa’s SOEs is a complex undertaking, yet essential for achieving the
economic growth and prosperity we envision. By looking into the above recommendations
SOEs can transform into sustainable, efficient, and transparent entities that serve the public
good.
I trust these recommendations will support your reform efforts and strengthen SOEs' role in
driving South Africa’s progress.

Kind regards
Geraldo Johnson (Candidate attorney )

Question 3
Introduction
86
Motswaledi 2024 J. Pol. & L. 74.
87
Motswaledi 2024 J. Pol. & L. 74.
88
Motswaledi 2024 J. Pol. & L. 74.
89
Mutize, M "The Governance of State-Owned Enterprises in Africa: an analysis of selected cases."2020 Journal
of Economics and Behavioral Studies (12) 9-16.
90
Mutize 2020 Journal of Economics and Behavioral Studies 9-16.
91
Mutize 2020 Journal of Economics and Behavioral Studies 9-16.
92
Mutize 2020 Journal of Economics and Behavioral Studies 9-16.
93
Mutize 2020 Journal of Economics and Behavioral Studies 9-16.
94
Mutize 2020 Journal of Economics and Behavioral Studies 9-16.
Illegal mining has emerged as a significant issue in South Africa, especially with the rise of
informal miners, known as “zama zamas,” who risk their lives to extract minerals from
abandoned shafts.95 The growing presence of these miners has posed complex challenges
to local communities and mining companies, encompassing concerns over safety,
environmental degradation, and corporate responsibility. This report examines the
phenomenon of illegal mining, corporate social responsibility (CSR) in the mining industry,
and actionable strategies for mining companies to address illegal mining sustainably.
Zama Zama Mining and Corporate Governance Challenges
"Zama zama" refers to informal or illegal mining activities in South Africa, primarily involving
abandoned mines. Individuals engaging in zama zama operations often lack formal
employment, mining permits, or regulatory oversight, which makes the practice hazardous
and environmentally destructive.96 Zama zamas extract minerals—primarily gold and
diamonds—using rudimentary tools, frequently working in unsafe conditions. 97 This practice
poses significant challenges to corporate governance in the mining industry. 98Formal mining
companies must comply with regulations to ensure safety, environmental protection, and
labour standards, but zama zama activities sidestep these controls, raising ethical and
operational concerns.99 Furthermore, the unchecked exploitation of these resources disrupts
formal markets, erodes tax bases, and pressures companies to increase security
expenditures, impacting both corporate governance and community relations. 100
Consequently, tackling zama zama requires a nuanced approach involving stricter
regulations, social interventions, and industry collaboration to address the socio-economic
factors fuelling these practices.101
Corporate Social Responsibility (CSR) and Illegal Mining
Mining companies have a duty to address the social, environmental, and economic
implications of their operations, including the aftereffects of abandoned mines. CSR in this
context requires mining companies to go beyond profit-driven motives and engage in
practices that prioritize people, the planet, and sustainable profit. 102Addressing the social
needs of communities affected by mining operations and abandoned shafts involves
providing support, creating alternative job opportunities, and enhancing safety measures. 103
Environmental stewardship is equally crucial to prevent further degradation around these
mining sites, and transparent governance frameworks must guide these efforts.104
The 3 P’s: People, Planet, and Profit

95
Bester, V "Corporate social responsibility and artisanal mining: Towards a fresh South African
perspective." 2021 Resources Policy (72) 102124.
96
Bester, V "Corporate social responsibility and artisanal mining: Towards a fresh South African
perspective." 2021 Resources Policy (72) 102124.
97
Bester 2021 Resources Policy (72) 102124.
98
Ibid.
99
Ibid.
100
Ibid
101
Ibid.
102
Reider, G "Corporate Social Responsibility." 2013 Year in Review: An Annual Survey of International Legal
Developments and Publications of the ABA / Section of International Law (47) 183-200.
103
Reider 2013 Year in Review: An Annual Survey of International Legal Developments and Publications of the
ABA / Section of International Law 183-200.
104
Reider 2013 Year in Review: An Annual Survey of International Legal Developments and Publications of the
ABA / Section of International Law 183-200.
The “3 P’s” approach is central to CSR and provides a framework for addressing the multi-
faceted impacts of mining:
People105: The well-being of both local communities and zama zamas is of paramount
importance. Many zama zamas live in poverty, and their engagement in illegal mining is
driven by a lack of viable employment. 106 Mining companies can address these issues by
working with local governments to provide training programs, establish employment
opportunities, and support economic development initiatives in mining-affected areas. In
turn, these programs can offer alternative livelihoods for individuals who might otherwise turn
to illegal mining.
Planet: Environmental sustainability must be a priority for mining companies, particularly in
areas impacted by abandoned and unsealed shafts.107 Mining companies should invest in
environmental rehabilitation of abandoned mines to prevent further contamination and
hazardous conditions. This includes securing entrances to abandoned mines,
decontaminating water sources, and rehabilitating land. Implementing eco-friendly practices
and engaging in regular environmental assessments will also protect local ecosystems and
the health of communities nearby.
Profit: The financial stability of mining companies should not come at the expense of ethical
practices.108 Profit should be generated in ways that respect the environment and contribute
to local communities.109 This approach not only enhances the company’s social license to
operate but also strengthens its reputation and long-term profitability.
Workers’ Rights and Community Upliftment
Ensuring the rights and safety of all workers, including those associated with zama zama
mining, should be central to any corporate initiative.110 Mining companies should advocate
for policies that protect informal miners, providing resources and awareness campaigns
about safer alternatives.111 Engaging directly with communities can also foster trust and offer
insights into their needs, guiding companies to implement more effective CSR programs. 112
Corporate investments in health, education, and infrastructure within these communities can
address some root causes of illegal mining, providing individuals with alternatives to informal
mining.113

Examining Zama Zama Operations and Corporate Governance Measures

Corporate governance structures can support mining companies in responsibly managing
abandoned shafts and mitigating illegal mining activities. Firstly, companies must implement
secure barriers and regular monitoring to prevent unauthorized access to closed mines.
114
Clear lines of accountability, particularly in mine rehabilitation efforts, can help companies
105
Marsden, J "Big data analytics and corporate social responsibility (CSR): Adding quantifiable and qualifiable
sustainability science to the three P’s." 2018 Studies in informatics, Shizuoka University (23) 29-43.
106
Marsden 2018 Studies in informatics, Shizuoka University 29-43.
107
Marsden 2018 Studies in informatics, Shizuoka University 29-43.
108
Marsden 2018 Studies in informatics, Shizuoka University 29-43.
109
Marsden 2018 Studies in informatics, Shizuoka University 29-43.
110
Compa, L “Corporate social responsibility and workers' rights." 2008 Comp. Lab. L. & Pol'y J. (30) 1.
111
Sharma, D "Corporate social responsibility of mining industries." 2015 International Journal of Law and
Management (57) 367-372.
112
Sharma 2015 International Journal of Law and Management 367-372.
113
Sharma 2015 International Journal of Law and Management 367-372.
114
Jenkins, H "Corporate Social Responsibility (CSR) in the mining industry." 2006 HISA (7) 2006.
manage these sites more effectively. 115In addition, companies can collaborate with law
enforcement agencies to maintain security and ensure safety for surrounding
communities.116 By doing so, mining companies can demonstrate their commitment to
corporate citizenship and reinforce their image as ethical, accountable entities.
Rebuilding Public Trust through Community Engagement and Security Initiatives
Public trust can be restored by fostering transparent communication and engaging with
community leaders.117Mining companies should also focus on practical solutions to curb
illegal mining, such as launching public awareness campaigns about the dangers of zama
zama activities and creating alternative economic opportunities. 118Employing security
personnel trained in de-escalation techniques can protect both community members and
company assets while respecting the rights of informal miners.119
Furthermore, building trust through open dialogue is essential. Mining companies should
regularly report on their efforts to address illegal mining, environmental impact, and
community welfare, showing a genuine commitment to corporate responsibility.
In conclusion, restoring public trust in the mining sector requires a multifaceted approach
that balances security, transparency, and community engagement. By prioritizing open
communication and demonstrating accountability in addressing zama zama mining,
companies can strengthen relationships with local communities.
Strategies for Rebuilding the Reputation of Mining Companies
Mining companies have faced significant public criticism due to the environmental, social,
and economic impacts associated with illegal mining and abandoned shafts. To rebuild
public trust and establish themselves as responsible corporate citizens, mining companies
must adopt comprehensive reputation management strategies.
Transparency in communication is essential.120 Regular public reports on environmental
rehabilitation efforts, security measures, and community upliftment initiatives can
demonstrate the company’s commitment to positive change.121
Visible community engagement is crucial.122 Companies should establish formal channels for
engaging with local leaders and community members, providing forums where concerns can
be addressed and where companies can directly communicate their efforts to promote safe
mining practices, secure abandoned shafts, and create alternative economic opportunities.123
Community partnerships also allow for the co-development of programs that meet local
needs and align with corporate objectives, further solidifying the company's reputation as a
committed community partner.124
Preventing Zama Zama Mining through Security and Economic Alternatives

115
Jenkins 2006 HISA 2006.
116
Jenkins 2006 HISA 2006.
117
Jenkins 2006 HISA 2006.
118
Ibid.
119
Ibid.
120
Jahansoozi, J "Exploring trust and transparency." 2006 Journal of management development (25) 942-955.
121
Jahansoozi 2006 Journal of management development 942-955.
122
Ninan, J "Governance through trust: Community engagement in an Australian city rebuilding precinct."2024
Project Management Journal (55) 16-30.
123
Ninan 2024 Project Management Journal 16-30.
124
Ninan 2024 Project Management Journal 16-30.
A proactive approach to security can prevent zama zamas from accessing closed mines. 125
Companies should implement continuous site surveillance, leveraging technology like
drones and automated security cameras for real-time monitoring. 126Engaging security
personnel trained in non-invasive, respectful community interactions can also prevent
unauthorized access without escalating tensions with local residents.
A key driver of zama zama mining is the lack of viable employment and economic
opportunities.127 To address this, companies must work with local communities, government,
and NGOs to create alternative economic opportunities through skills training, local hiring,
and support for small businesses. 128This approach provides individuals with alternative
livelihoods, which reduces reliance on illegal mining activities.

Conclusion
Addressing illegal mining in South Africa requires a multifaceted approach rooted in
corporate social responsibility and ethical governance. Through the integration of strong
governance structures, commitment to the “3 P’s” of people, planet, and profit, and active
community engagement, mining companies can mitigate the risks posed by zama zama
operations and rehabilitate their public image.

Bibliography
Journal Articles
Thabane, T "Corporate Governance Deficiencies in South Africa's State-Owned Companies:
A Critical Reflection." 2018 Potchefstroom Electronic Law Journal (21) 1-31.

125
Makhetha, E "‘Zama Zama’and leftovers: The recycling of ore in abandoned gold mines in South Africa."
2023 The Extractive Industries and Society (14) 101272.
126
Makhetha 2023 The Extractive Industries and Society 101272.
127
Bester, V"A corporate social responsibility conceptual framework to address artisanal gold mining in South
Africa." 2022 Resources policy (79) 103030.
128
Bester 2022 Resources policy 103030.
Masianoga, E “Ethical leadership and employee creative behaviour: a case study of a state-
owned enterprise in south africa." 2023 International Journal of Professional Business
Review: Int. J. Prof. Bus. (8) 3- 22.

Motswaledi, T "An Examination of Political Patronage and Maladministration on State-

Owned Entities with Specific Reference to South African Airways: A Literature Study."
2024 J. Pol. & L. (17) 74.
Mutize, M "The Governance of State-Owned Enterprises in Africa: an analysis of selected
cases."2020 Journal of Economics and Behavioral Studies (12) 9-16.
Reider, G "Corporate Social Responsibility."2013 Year in Review: An Annual Survey of
International Legal Developments and Publications of the ABA / Section of International Law
(47) 183-200.
Marsden, J "Big data analytics and corporate social responsibility (CSR): Adding quantifiable
and qualifiable sustainability science to the three P’s." 2018 Studies in informatics, Shizuoka
University (23) 29-43.
Compa, L “Corporate social responsibility and workers' rights." 2008 Comp. Lab. L. & Pol'y
J. (30) 1.

Sharma, D "Corporate social responsibility of mining industries." 2015 International Journal

of Law and Management (57) 367-372.
Jenkins, H "Corporate Social Responsibility (CSR) in the mining industry–the risk of
community dependency." 2006 HISA (7) 2006.
Jahansoozi, J "Exploring trust and transparency." 2006 Journal of management
development (25) 942-955.
Ninan, J "Governance through trust: Community engagement in an Australian city rebuilding
precinct."2024 Project Management Journal (55) 16-30.
Bester, V"A corporate social responsibility conceptual framework to address artisanal gold
mining in South Africa." 2022 Resources policy (79) 103030.
Makhetha, E "‘Zama Zama’and leftovers: The recycling of ore in abandoned gold mines in
South Africa." 2023 The Extractive Industries and Society (14) 101272.
Dissertation
Mbele, N Corporate governance in state-owned enterprises. (Wits School of Governance:
University of Witwatersrand) 2015.

Rubrics