By Dr Reuel J. Khoza  I  01 December 2025

1. Executive Summary  

State-Owned Enterprises (SOEs) are critical to national development, yet many have been plagued by ethical failures, corruption, and weak governance. This paper argues that reform is not only possible but urgent. Drawing on global best practices (OECD, World Bank, IFC), case studies from South Africa and beyond, and policy recommendations, it outlines a roadmap for ethical renewal.

2. Introduction: The Moral Imperative

Ethical leadership is the cornerstone of sustainable governance. Without it, SOEs collapse under corruption, incompetence, and abuse of power. As Martin Luther King Jr. said, “The time is always right to do what is right.”

3. Diagnosis: The Genesis of Unethical Behaviour

Research highlights several root causes of ethical decline in SOEs:

• Weak work ethic and entrenched corruption.
• Political deployees lacking competence and integrity, leading to poor decision-making.
• Systemic misuse of power, often linked to shareholder (government) interference.
• Failure of consequence management, allowing unethical behaviour to persist unchecked.

South African SOEs such as Eskom, Transnet, and South African Airways illustrate how corruption and poor leadership erode institutional credibility.

4. Global Best Practices in Ethical Leadership

International frameworks provide guidance for reform:

• OECD Guidelines on Corporate Governance of SOEs (2024): Stress professionalised boards, transparency, and accountability.
• World Bank/IFC Leadership Toolkit: Emphasises ethical training, board independence, and shareholder discipline.
• Corporate Governance Literature: Calls for clear separation of ownership and management, merit-based appointments, and strong audit mechanisms.

5. Case Studies of Ethical Reform

• South Korea (Post-1997 Crisis): Introduced strict governance reforms, merit-based leadership, and transparency, restoring SOE credibility.
• South Africa (SANRAL): Demonstrated how strong governance and accountability can sustain performance despite wider SOE failures.
• OECD Countries: Many have implemented independent boards and external audits to reduce political interference.

6. Policy Recommendations

To restore ethical leadership in SOEs, governments should adopt a multi-pronged strategy:

A. Governance Reform

• Professionalise boards: Appoint members based on merit, not political loyalty.
• Separate ownership and management: Reduce ministerial interference in operational decisions.
• Independent audits: Mandatory external reviews of finances and ethics compliance.

B. Ethical Leadership Development

• Mandatory ethics training for executives and board members.
• Leadership accountability charters: Clear codes of conduct with enforceable sanctions.
• Whistleblower protection: Encourage reporting of corruption without fear of reprisal.

C. Consequence Management

• Zero tolerance for corruption: Immediate removal of unethical leaders.
• Performance-linked accountability: Tie executive compensation to ethical and operational outcomes.
• Public transparency: Publish annual ethics and governance reports.

D. Partnerships for Renewal

• Engage private sector allies: Leverage expertise and resources for reform.
• Civil society oversight: Involve watchdogs and NGOs in monitoring governance.
• International benchmarking: Align with OECD and World Bank standards.

7. Conclusion: The Time is Always Right

Ethical leadership in SOEs is not optional - it is existential imperative. Reform requires deep surgery, decisive action, and global best practice adoption. South Africa and other African nations must act now to restore credibility, efficiency, and public trust.

The time is always right to do right. Ethical leadership must become the DNA of SOEs.

Sources

• OECD Guidelines on Corporate Governance of SOEs (2024)
• World Bank/IFC Leadership Toolkit for SOEs
• Corporate Governance in SOEs: International Review
• Root Causes of Ethical Failures in South African SOEs
• The Ethics Institute: Ethical Failures in SOEs
• SANRAL Case Study
• Strategy and Governance of SOEs in Africa

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