OUTA goes to court to strengthen accountability against malfeasant SOE bosses
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Image above: Shutterstock
HOLDING PUBLIC OFFICIALS TO ACCOUNT: Changing the PFMA to enable delinquency actions against heads of state-owned entities who mismanage and abuse those entities
OUTA's action is aimed at changing the law, to ensure equal standards and stronger accountability of those who manage state-owned entities
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.
OUTA is represented by Advocate Niël du Preez, SC, and Advocate Sonika Mentz, instructed by attorney Andri Jennings of Jennings Inc.
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).
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.
The OUTA legal papers: Changing the PFMA
OUTA’s notice of motion is here.
The founding affidavit by Advocate Stefanie Fick is here.
Accountability: There are at least 266 state-owned entities
Image at left: Shutterstock / SOEs
The National Treasury’s list of public institutions listed in PFMA schedules 2 and 3, as of 22 August 2025, is here. There are 266 national and provincial entities in these two schedules (66 are provincial entities), not including any sub-entities wholly owned by those 266. These entities oversee hundreds of billions of rand in public funds.
OUTA’s case focuses on entities in schedule 2 and 3 (entities in schedule 1 are institutions established in terms of chapter 9 of the Constitution, set up to strengthen democracy).
- Schedule 2, major public entities: 21 entities, including Eskom, the SABC, SAA, Telkom and Transnet.
- Schedule 3A, national public entities: 161 entities, including the Border Management Authority, museums, the CIPC, catchment management authorities, Ingonyama Trust Board, the National Energy Regulator (Nersa), the National Skills Fund, the National Youth Development Agency, NSFAS, the Road Accident Fund, the RTIA, the Road Traffic Management Corporation, Sanral, SARS, SASSA, and all the sector education and training authorities (SETAs).
- Schedule 3B, national government business enterprises: 18 entities, including the water boards, the Passenger Rail Agency (Prasa), the Public Investment Corporation and Sasria.
- Schedule 3C, provincial public entities: 48 entities, including gambling boards, the Gautrain Management Agency and the Zulu Royal House Trust.
- Schedule 3D, provincial public business enterprises: 18 entities, including development corporations.
NSFAS and the Services SETA: Andile Nongogo and Ernst Khosa
Image at right: Shutterstock / NSFAS
The National Student Financial Aid Scheme (NSFAS) and the Services Sector Education and Training Authority (Services SETA) are state-owned entities falling under the Department of Higher Education. Neither is registered as a company, so they fall under the PFMA, and their accounting authorities are not subject to the possibility of being declared delinquent directors.
NSFAS receives R48.769 billion from the Department of Higher Education this year (2025/26), to provide support to an estimated 695 610 students (426 296 university students and 269 314 TVET students). It last produced an annual report for 2022/23. In recent years, the board and management allowed chaos in student funding, leaving thousands without accommodation or support.
The Services SETA is one of 21 SETAs which together receive R20.805 billion this year from the fiscus, funded through the skills levy paid by employers.
In 2023 and 2024, OUTA investigations implicated NSFAS’s then CEO, Andile Nongogo, and the then chair of the board, Ernest Khosa, in corruption. As a result of OUTA’s investigations, Nongogo was fired in October 2023 (see here) and Khosa resigned in April 2024, without facing accountability. Khosa has chaired the board of the Civil Aviation Authority since 2018.
Nongogo was CFO at the Services SETA from March 2014, then CEO from May 2016 until July 2018. OUTA found he was implicated in buying overpriced goods and services for the SETA, but was able to move on to be appointed as NSFAS CEO in December 2020. OUTA reported Nongogo’s conduct to the South African Institute of Chartered Accountants (SAICA) and laid a criminal complaint with the SAPS against him relating to a tender at the Services SETA. See here.
