The acting chairperson of the Wesgro board briefed the Committee on the decision to extend the contract of the entity’s current chief executive officer (CEO), and the subsequent increase in remuneration as well. The MEC for Finance and Economic Opportunities also made input to the Committee and addressed Members’ questions in the virtual meeting.
He gave a brief background to Wesgro, and said that the entity conducted the work of six different agencies, so the CEO carried enormous responsibilities. His remuneration package was significantly lower than that of his counterparts. This was an important observation, given the workload of Wesgro in comparison with other provinces.
Members welcomed the decision to establish an independent review of the decisions taken by the Wesgro board. The Committee would wait for the review findings and then decide on a way forward. They were displeased that the former board members declined the invitation to present their opinions to the Committee – some Members felt this was evading accountability however the Committee agreed that they would call these individuals once the review findings were received. Members asked what preceded the situation, questioned the scope of the review, who would appoint the independent reviewer, how much it would cost, whether the current Wesgro CEO could be considered independent (being a former DA MP) and whether the remuneration and the reappointment had been consistent with the relevant prescripts. Members lamented the manner in which the increase had been approved, and called for transparency. The manner the CEO was reappointed was also criticised. Members were concerned by risks in Wesgro leadership and governance and reputational damage.
The Committee resolved to:
-receive quarterly reports from the MEC on decisions taken by the Wesgro board
- request that legal counsel interpret the relationship, independence etc of the Department representative on the board
-welcomes the undertaking of the independent review, that the Committee be served with the findings of the review, that the mandate of the review be shared with the Committee and to reiterate the dire need for economic growth and appreciates the role of Wesgro in this mammoth task post-COVID
-be furnished with written agreement between Wesgro and the MEC/Department on who would be undertaking the review. It was important that all parties were in agreement
-requests written input on risk regarding this topic from the MEC and the Wesgro board
-requests that the persons that resigned from the board also be included in the independent review
Wesgro CEO’s contract and remuneration
Mr Michael Spicer, Acting Chairperson: Wesgro board, briefed the Committee on the decision to extend the contract of the current Wesgro chief executive officer (CEO), Mr Tim Harris, and the subsequent increase in remuneration as well.
He gave a brief background to Wesgro, and said the entity conducted the work of six different agencies. He cited Kwazulu-Natal and the Eastern Cape as prime examples of these different agencies. The Wesgro CEO thus carried enormous responsibilities.
He said the Wesgro CEO's remuneration package was significantly lower than that of his counterparts. This was an important observation, given the workload of Wesgro in comparison with other provincial agencies.
He also took the Members through the Wesgro Act as the basis for the decision that had been taken by the Wesgro board about the contract renewal and the adjusted salary of the CEO.
Concerns over process
Mr David Maynier, Western Cape MEC: Finance and Economic Opportunities, informed the Committee that what was not at issue was the performance and contribution of Wesgro to the Western Cape economy.
The issue at hand had to do with the concerns raised by himself, the former Wesgro board chairperson and Ms Judith February about the reappointment process and how the remuneration package had been determined.
It was thus important to ascertain whether these processes complied with sound corporate governance principles. It was a position which had led to a disagreement with the Wesgro board.
After he had sought legal advice, he had taken action, and that this action had not been welcomed by the board.
Mr Maynier said he had two principal concerns. These were:
- The agreed increase in remuneration had been excessive and significant given constraints.
- The manner in which the decision had been taken to increase the remuneration.
He said the decision had been taken based on a verbal presentation. This did not meet the relevant requirements, as there had been no paper trail, nor had the sub-committee on human resources (HR) met to discuss the increase.
Subsequent to this, the board had accepted an offer to reduce the remuneration package, but the original employment contract had stipulated that the salary should be increased from R2.1 million to R2.7 million.
It had also stipulated an increase of 30% for the performance bonus. This meant that the annual remuneration package for the CEO would amount to R3.5 million, and he found this excessive.
Given these circumstances, he had to engage the board to rescind the decision on remuneration.
The MEC indicated that it was important to brief the Committee on the next steps that would be taken to address the matter.
During the last few weeks, he had had several engagements with the board, and considerable progress had been made as a result.
An agreement had been reached that an independent review would be conducted to ascertain whether the reappointment complied with the relevant legislation, and whether the remuneration increase was in line with sound good governance guidelines.
MEC Maynier said it was important to conclude this matter, as the province's economy was reeling and had to be "rebuilt."
Mr C Dugmore (ANC) asked whether the Chairperson had done a roll call of the meeting. He said he wanted to hear from the board members who had resigned from the Wesgro board as well.
The Chairperson replied that the matter had been discussed in her opening remarks. Both the former chairperson of the board and Ms Judith February had tendered letters of apologies. The former chairperson had indicated that since he was no longer part of the board, he did not want to appear before the Committee, and Ms February had advised that she had to attend an urgent board meeting that was taking place at the same time as the Standing Committee's meeting.
Mr A van der Westhuizen (DA) thanked the MEC and Mr Spicer for the presentation. He indicated his delight at the decision to institute an independent review. He requested more information on whether the Wesgro board had agreed to the independent review and the associated mandate.
Ms N Nkondlo (ANC) said that her interest in the matter was more historic, in the sense that she wanted to know what had preceded the whole scenario. She asked whether the independent review would form part of the MEC's investigation. She recalled that two board members had already resigned, and wanted to know by when the independent review process would be concluded. Would the scope of the independent review include the remarks by the board members who had resigned?
Ms Nkondlo also asked for clarity on who would appoint the independent reviewer. She was confused, as the MEC had said that an agreement had been reached on the independent review.
Wesgro should also explain why the entity referred to itself as being free and independent, when it was a government-funded agency. The current CEO was a former DA Parliamentarian, so how could it be expected of him to be truly independent?
She said the increased package had been agreed to after a verbal presentation, and wanted to know whether this was common practice. She also questioned why the Wesgro board had cited political interference when the MEC was the relevant executive oversight. She reiterated her stance that as a schedule 3(c) company, Wesgro had to account for its decisions, and that the Committee had to know the rationale behind the decision to increase the remuneration.
Mr Dugmore asked whether Wesgro had a policy in place to harmonise the wage gap, if one considered the debates around income inequality in the country.
The Chairperson said that it was important to determine whether the remuneration and the reappointment had been consistent with the relevant prescripts.
Mr R Mackenzie (DA) called on Members to focus on the issue at hand, and not to confuse the meeting. It was important to determine where the process was, and by when it would be concluded. He recommended that the report should not be sent to board first, but should instead be sent to the Committee directly. He also proposed that any resolutions passed by the Committee should include a provision that called on former board members to avail themselves to discuss the matter. The former board chairperson had a duty to come and explain the decisions taken under his watch.
MEC Maynier’s response
Mr Maynier replied that the broad scope of the review had been agreed to, and that any changes had to be mutually agreed to by both the board and his department. A decision on who should conduct the review would still be taken.
He repeated that the investigation that he instituted had confirmed the issues that he had raised in his introductory remarks. The investigation was not part of the review – the review would be an independent and separate process. If the independent reviewer felt that there was a need for former board members to provide evidence, the reviewer could call them for this purpose.
He explained that there had been three issues at hand. These were:
- Whether the decision to reappoint the CEO complied with legislation. Legal counsel would look into this matter.
- Whether the increase in remuneration was in line with good governance principles. The approach would be to look at auditing firms that had the requisite expertise and skills in this respective field.
- Benchmarking exercise on remuneration. In this instance a firm that specialised in the field would be approached.
The MEC disputed political interference allegations leveled against him. As the relevant political head, he had a fiduciary duty to exercise oversight over Wesgro. He had always sought to engage the board to reapply their minds on the issue. This had eventually led to the joint decision to appoint an independent reviewer.
At this juncture, it was a bit premature to confirm the exact time that the report would be released, as the relevant appointment and other processes had to be sorted out first.
He was at pains to explain that he wanted to conclude the matter expeditiously, as the Western Cape economy had to be the sole focus during the current economic malaise.
Mr Spicer confirmed that a board meeting had been held the previous evening, where both the board and the MEC had agreed to establish an independent review process. One of the other key decisions that had been taken was that all decisions would be taken jointly.
He explained that the reason why he had referred to the Wesgro board as being free and independent had been as a result of the Wesgro Act. The Act enshrined the independence of Wesgro. However, despite the board being independent, it still had a duty to account to this Committee and the provincial administration.
The board understood that the MEC had an oversight function, and the relevant legislation was quite clear on who could and could not make decisions. The board was thus independent enough to make relevant decisions about strategy, remuneration and other matters that fell within its purview.
Wesgro was mindful about the Department's and administration's economic goals, in terms of which it did not have unfettered control. The issue that came up at the board was whether the oversight by the MEC had veered outside the legislative framework.
Mr Spicer explained that the term of office of the current CEO would have expired earlier in 2020. Last year, the CEO had received several job offers and this had prompted the board to consider renewing the contract. The CEO could serve for only two terms of five years. The independent review would be able to answer whether the CEO had been reappointed, or had his contract renewed.
He added that the board had had discussions about the salary scales, as it had been discovered that the salaries had not been on scale and on par with peer salaries. A benchmarking exercise had then been conducted, after which the relevant salary adjustments had been effected. All Wesgro staff would also receive the same bonus as the CEO.
Mr L Mvimbi (ANC) said that the Finance Committee was empowered to conduct oversight over Wesgro. Members who tried to stifle debate should be aware that all Members had an oversight responsibility over Wesgro. Members should not pre-judge the outcome. Some might have served for six years already and be well versed in certain matters, but he had become a Member only a year ago so the interaction with Wesgro had helped him to understand the entity.
He wanted to ascertain who would be responsible for the independent review, and how much it would cost. However, cost should not be a factor when addressing pertinent issues. Even though Wesgro might be independent, it was still a state entity and thus accountable to Parliament.
He lamented the manner in which the increase had been approved, and called for transparency. A resolution should be passed that called for a Member of the Committee to sit on the Wesgro board. He also proposed that the former board chairperson and Ms February should be called to appear before the independent review.
Ms Nkondlo said that the issue of good governance and performance at state-owned entities had received widespread coverage, with a renewed focus on the need for enhanced oversight by the legislature. She also wanted to understand why law firm Webber Wentzel had arrived at the conclusion that the MEC had overreached.
She said the MEC's letter to the board indicated general confusion on the appointment or reappointment of the CEO, and called for clarity on this matter. She criticised the manner in which the reappointment had been handled, as this might point towards an "uncanny" relationship between the former board chairperson and the CEO.
She recalled that in August 2018, the board had already taken a decision to extend the CEO's contract. This seemed problematic, if one considered that the contract in question would lapse only in January 2020.
Mr Van der Westhuizen commented that Wesgro had surely suffered reputational damage since the story broke in the media. He wanted to know whether it had identified any risks associated with the decision that had been taken, and how these risks would be mitigated.
The Committee Chairperson disagreed with Mr Mvimbi's proposal that a Committee Member should sit on the the Wesgro board. This would negate the oversight role of the Committee.
Mr Maynier said that it was too early to determine the costs, and both the provincial government and Wesgro would carry the financial responsibility for the independent review. The provincial government would assume responsibility for the first phase of the review that dealt with the legal opinion, whereas Wesgro would focus on the phase two and three of the review, as explained during his previous responses. Both entities would ensure that the cost implications were kept low.
The reappointment process would be addressed in the independent review, which should establish whether the process complied with good governance principles and with the relevant legislation.
The risks could be mitigated by having a thorough and quick review of the process in order for Wesgro to focus on the economic recovery of the province.
Mr Spicer said that the provincial government and the City of Cape Town had a representative on the board. It was thus incumbent on this representative to inform these two entities about developments at Wesgro.
He clarified that the board had not approved any renewal of the CEO's contract in August 2018. He had informed the board in August 2019 that the CEO had received work offers from external actors.
This had prompted the board to institute a benchmarking process.
Mr Spicer commented that a board had the right to effect reappointments and salary adjustments. The CEO had had a meeting with the Wesgro chairperson and the deputy chairperson, where the decision had been discussed. Afterwards, the decision had been taken to the rest of the board.
He thanked the Chairperson and the Committee for the opportunity to discuss the matter.
Mr Mackenzie sought clarity of the Chairperson’s earlier comment that the former Wegro board chairperson “did not want to be part of” the meeting today.
The Chairperson clarified the former chairperson said he did not want to attend the meeting as he felt it would be inappropriate for a former board member to attend given that he was no longer part of the board. She understood this position given that the Board was its own juristic person and essentially takes decision as a board and not as individuals.
Ms Nkondlo begged the indulgence of the Committee – she felt that when a Member raised a matter which other Members did not agree with, an environment should not be created where Members stifled each other or the debate. The point of the meeting was to understand the situation and hear the Minister’s response and arrive with preconceived notions. The Committee was mainly in support of the independent review but it needed to get the scope of the review. There was also the issue of the cost implications of the review. The review will however strengthen governance over all such entities in the Western Cape for example, the IDZs, and the Committee’s own oversight of these entities.
Mr Van der Westhuizen proposed the Committee welcome the undertaking by Wesgro and the MEC for an independent review if the interpretation of the relevant legislation, procedures followed in the appointment and the determination of the remuneration of the Wesgro CEO. The Committee should ask for the mandate of the review panel be shared with it and that the Committee be served with copies of the findings of the review. The Committee should reiterate the dire need for economic growth in the Western Cape and appreciate the role of Wesgro in this mammoth task post-COVID.
Mr Mvimbi asked that the lessons learnt by the Committee be factored in the resolutions. He raised the suggestion of a Committee representative on the Wesgro board not to interfere in the running of the board, but as a form of representation as the Department itself sits on the board. Perhaps the Committee should regularly be briefed on important meetings of the Wesgro board and the outcomes of such meetings. Perhaps this could be a monthly report.
The Chairperson wondered if it might be more appropriate to request this from the MEC given that the board reports directly to the MEC.
Mr Van der Westhuizen was concerned as sometimes these boards do not meet on a monthly basis. Perhaps it would be better if the Committee requested quarterly reports.
Mr Mvimbi agreed. For example, with the current situation, the decision was take in March but the Committee only heard about it in June. If the Committee was kept informed of all board decisions by way of a report, it would have known about this matter earlier. He guaranteed Members that if this issue was not made known in the media, the Committee would never have heard about it.
Ms Nkondlo thought the feedback mechanism/information flow between the HOD, as the Executive representative on the board, and the MEC be strengthened. This mechanism is important regardless of who is the Executive Authority. This ensures harmony of communication.
The Chairperson said it might be simpler for the Committee to request that legal counsel interpret the relationship, independence etc of the Department representative on the board. This will aid the Committee in understanding this relationship.
Ms Nkondlo agreed.
The Chairperson said on the suggestion of Mr Mvimbi, the Committee receives quarterly reports from the MEC on decisions taken by the board.
Mr Mvimbi agreed.
The Chairperson said on the suggestion of Mr Van der Westhuizen, the Committee welcomes the undertaking of the independent review, that the Committee be served with the findings of the review, that the mandate of the review be shared with the Committee and to reiterate the dire need for economic growth and appreciates the role of Wesgro.
The Committee agreed.
The Chairperson added that the Committee should be furnished with written agreement between Wesgro and the MEC/Department on who would be undertaking the review. It was important that all parties were in agreement.
Ms Nkondlo raised the important matter of risk in the bigger scheme as it related to leadership, stability of the entity and governance. The Committee perhaps needed a written response on this given that already, two board members were lost. The Committee needs to understand the effect of this risk and how it was being managed. The Committee does not want to see massive resignations which could cause instability.
The Chairperson said the resolution is that the Committee requests written input on risk regarding this topic from the MEC and the Wesgro board.
Ms Nkondlo agreed.
Mr Mackenzie, on the matter of the previous board chairperson declining the invitation to attend the meeting today, said this is not how government operates – one cannot resign and then avoid all accountability. This was seen in the State Capture Commission of Inquiry where some people were summoned. Although the Committee was not there yet, it needs to understand this as part of the review. Accountability cannot be evaded by resigning.
The Chairperson said the resolution would be that the Committee requests that the persons that resigned from the board also be included in the independent review. Depending on the findings of the review, the Committee can then decide on how to go forward.
Ms Nkondlo said this was why she asked that both of the former board members be present today. this especially once an opinion has been put out there, as Ms February has done – this opinion must be accounted for. These members should be included in the review process as per Committee resolution. The former chair made serious allegations on the Wesgro leadership – this cannot be left as is. Depending on the review findings, these members should be asked, or subpoenaed, to appear before the Committee.
Mr Mvimbi said it was also important that the Committee hear these views given that they were divergent – this might further empower the Committee. He was concerned the review process might take a long time and the Committee could meet with these individuals in the meantime.
The Chairperson cautioned Members to allow the review to unfold. If the Committee meets with people while the independent review occurred, it might be perceived as the Committee conducting its own review. She urged Members to wait for the findings of the independent review. Given the type of organizations involved, it is likely the findings presented will be comprehensive. The Committee should not anticipate these findings but engage it when received.
The meeting was adjourned.
- (1) Minister letter to Figaji (1) 18.03.2020
- (2) Figaji letter to Minister (1) 18.03.2020
- (3) Figaji letter to Minister (2) 18.03.2020
- (4) Minister letter to Figaji (2) 20.03.2020
- (5) February resignation email 21.03.2020
- (6) Minister letter back to February 23.03.2020
- (7) Figaji letter to Minister (3) 23.03.2020
- (8) Minister letter to Figaji (3) 07.04.2020
- (9) Minister letter to Figaji (4) 25.06.2020
- (10) Figaji letter of resignation 30.06.2020
- (11) Minister letter to Figaji on resignation 30.06.2020
- (12) Letter from Spicer to Minister 09.07.2020
- (13) Wesgro Response to Minister of 07 April 2020
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