Probing the Murky Waters: Governance, Politics, Parastatals and Mauritius’ State-Owned Enterprises

By Jan Arden

The recent controversies associated with the style of management of the Local Government Service Commission, with the firing of some 1,700 workers whose employment conditions were reportedly irregular – on a temporary basis – shortly before the general elections and the concomitant arrests of its chairperson and four Board members have raised a number of questions.The management of parastatals and companies, which are either controlled or owned in large part or entirely by the State, has never been a straightforward matter. Although my own high-level management experience has been acquired in non-public sector administration, I believe some basic principles are common to both, which are worth recalling here.

LGSC Employees. Pic – Defi

The operations of State-Owned Enterprises (SOEs) are generally structured with a CEO or Director General (DG) reporting to a legally responsible Board. This Board typically includes a politically appointed chairperson and members (considered directors), some of whom may be independent non-executive directors, often viewed more as “friendly advisors. It is the generally accepted wisdom particularly in SOEs that the twin structure of a chairperson and a CEO offers less risks of autocratic “dérives”, group think, imbalances, clans and cronyism than a PDG (Président-Directeur Général), where the same person occupies both substantive posts of President and CEO. There are a few cases of SOEs where the overall responsibility is shared with a holding company reflecting wider corporate interests than the main operational company. Such is the case more particularly with theSBM Bank (Mauritius) Ltd&SBM Holdings Ltd (SBMH)where two separate tandems of Chair/CEO and two separate Boards are required to work in some unison.

For unknown reasons, the previous regime decided to replicate that dual structure with the fusion of almost two dozen separate entities, including Air Mauritius, under the fold of a single Airport Holdings Ltd (AHL) with the parallel buyout of all individual shareholders and outside interests. It is not known what is the fate of Airport Holdings Ltd, but following the appointment of Kremchand Beegoo as chairman of Air Mauritius and Board members, it was expected that the Board might move swiftly to appoint a missing CEO, rather than the ad-hoc management structure that has been adopted since January 2025 and operated by a triumvirate including the Chairman and two Directors. In view of the wide scope of HR issues and the depth of financial and flight or fleet issues handed to them, we understand there have been many priorities to sort out, but this situation of ad-hoc management is unhealthy and troubling as it may harm both internal, technical fleet management and customer or PR aspects of our national carrier.

On most SOEs, several of the Board members are statutory representatives of their parent Ministry (e.g. Finance, PMO, Education, Social Security, etc.) which is believed should have a « droit de regard » on the SOE’s strategy, orientations and policies in conformity with government’s agenda, national budget and stated priorities. An internal independent auditor, an external audit, internal standard operating procedures for HR and an annual report more or less complete the set-up for what on paper should provide comfort to the authorities, the public and any stakeholder that the affairs of the SOE are being managed efficiently and diligently for the general good in whatever sector it may be operating. In most cases, there is no significant “bottom-line” or gross deviation from an approved budget. This contrasts with the private sector, which is admittedly better at proactively managing shareholder expectations than SOEs, given SOEs’ broader, more complex mandate to judiciously satisfy diverse stakeholders.

This represents the core principles and structural elements of sound, modern SOE management, as generally understood by educated laymen. These principles, often supplemented by vision/mission statements and corporate good governance codes, ought to apply to and govern all our parastatals and SOEs, ranging from utility companies and educational institutions to those operating in complex international commercial environments, such as our national carrier, Air Mauritius.

It bears mention that modern management practices in responsible private enterprises try to encompass wider concepts of ethics and morality in their operations, demonstrate better attention to environmental concerns, and foster a greater sense of corporate social responsibility, partly due to the introduction of CSR. State-Owned Enterprises (SOEs), on their side, tend to gravitate towards greater transparency and accountability to the public, either directly or indirectly through Parliament.

*  *  *

The Unheeded Responsibilities of Public Directors

What seems ignored or less appreciated by Board members (Directors) is the fiduciary and legal responsibilities they shoulder when they accept their nomination by the political establishment.

Simply put, a fiduciary responsibility is an obligation that prevents one party from acting in their own interest rather than in the interest of the organization. These responsibilities can be regrouped into three categories:

a.Duty of Care, Prudence, and Involvement: Requiring diligent and informed decision-making.
b. Duty of Loyalty to the SOE’s Interests: Demanding actions solely for the benefit of the State-Owned Enterprise.
c. Duty of Compliance: Encompassing adherence to all applicable laws, statutes, and audit/reporting requirements.

Failure to uphold their fiduciary responsibilities could create serious and costly consequences for a Board member (Director), who could be held personally and financially liable for breach of duty. From press reports, it appears the Board members of the Local Government Service Commission had voluntarily relinquished their duties and responsibilities to the Chairperson. The Chairperson then allegedly unilaterally selected, short-listed, and offered letters of (temporary?) recruitment to over one thousand candidates, using unknown bases and criteria, and without it being known whether this involved higher-level vetting from other quarters.

Whether political recruitment by the MSM government was the order of the day throughout 2024 is up to our individual judgement. But it is high time that such disregard of basic management rules of the game be severely sanctioned by courts after due process of law following ongoing investigations.

Those 1400 Mauritians who accepted unknowingly or for political reasons those « contracts » will have the opportunity soon to apply for some 3000 jobs to be offered under legally and procedurally normal conditions. We trust the abuse of politically motivated recruitments in the final stretch of a mandate will be rendered inoperative.

*  *  *

Corporate failures and Politics

At a broader level, it comes as no surprise unfortunately that despite the management principles we should adhere to and the legal responsibilities of Boardmembers/Directors, several high-profile international cases have come to light casting a heavy shroud over sound corporate governance. Locally, the history of corporate failures has dogged the Mauritian banking sector over decades. This includes financial scandals where five commercial banks — the Bank of Credit and Commerce, Habib Bank (Zurich), the Mauritius Cooperative Central Bank, the Union Bank, and the Delphis Bank — were forced to close, sometimes resulting in consequential losses to the public purse and considerable reputational damage.

While we cannot definitively state whether political considerations played an invisible hand in these and other scandals, one cannot overlook the most visibly political intervention: the dismantling of Bramer Bank and its parent Group, BAI. This action, carried out without legal oversight by the 2015 regime of SAJ and various political colleagues (including several high-profile legal minds), was not only a shock to thousands of investors and insurance policyholders, but also imposed costs exceeding Rs 25 billion on taxpayers and ordinary Mauritians. A decade after that planned political dismantling, our courts will, for the first time, have the opportunity to address the civil litigation and colossal damages claim that Dawood Rawat has entered against a variety of politico-administrative agents.

Mauritius Times ePaper Friday 23 May 2025