When Eric Molobi died, South Africa lost one of its key business leaders. He has been lauded as a man who did not abuse his political connections, kept his word and was passionate about black empowerment and job creation.
We must also spare a thought for Kagiso Trust Investments (KTI), the highly influential empowerment company that he led, which has lost its founding father. KTI's major asset is Kagiso Media, which owns controlling interests in radio stations Jacaranda, East Coast Radio and P4 (Cape Town and Durban).
CA-Ratings, the agency that evaluates companies' ability to service debt, put out an update yesterday pointing out that not only was Molobi an active part of KTI's management team, but he represented it on the boards of many of the companies it was invested in.
Charl Kocks, CA-Ratings' top analyst, says Molobi was "a founder of KTI and much of the philosophy and style of the group was created or influenced by his views … This affected investment strategy and staffing considerations".
Kocks has previously warned that a very small team at KTI was responsible for a number of time-consuming investments as well as for the management of the group as a whole.
Although KTI has appointed a senior executive recently, Kocks warns that more capacity is needed at the company.
He says this should not be difficult as "there is little doubt that KTI is an attractive employer", but adds that only time will tell whether the course set by Molobi will continue into the medium term.
Investors in the Kagiso group will be relieved that CA-Ratings did not immediately downgrade the ratings for KTI based on Molobi's death, as this implies some faith in the team left behind.
The fact that Remgro owns 37 percent of KTI should add another layer of comfort for KTI's business associates.
Remgro, the second-largest shareholder after Kagiso Trust, which owns 50.32 percent, bought the shares from Liberty Group and Nedbank for R450 million last October.
But it is clear that Molobi has left behind some very big shoes to fill and there is a warning in all this about why companies should undertake timeous and transparent succession planning.
The announcement on Monday by public enterprises minister Alec Erwin that his department was leading an effort to tighten the governance of state-owned enterprises is welcome news indeed.
But it does raise questions about the role of the private investors that the major state-owned companies, especially Eskom and Transnet, will turn to for help in funding their capital expenditure programmes, which are projected to exceed R137 billion over five years.
The role of private lenders is important because they provide an additional layer of commercial pressure to the oversight of parastatals' management teams.
Erwin said his department was working with the national treasury and the department of public service and administration to amend the Public Finance Management Act in such a way as to align performance measures at the major state-owned companies with the government's economic growth strategies.
The department has developed a risk management questionnaire to measure parastatals' compliance with the act, in addition to the performance risk analysis reviews that are conducted quarterly.
Erwin said the strategic roles of enterprises such as Eskom, Transnet and Denel required the balancing of economic development objectives with sound governance practices and financial viability.
The challenge was to balance the developmental role of parastatals with their ability to deliver services in an efficient, reliable and cost-effective manner. This was complicated by expectations that the companies raise finances to cover costs and maintain healthy and independent balance sheets. They needed to provide well-priced services to enhance national competitiveness and contribute to growth and job creation.
Erwin said his department was also working on new shareholder compacts that would provide clarity to the companies' boards on issues such as expected rates of return as well as compliance with corporate governance norms and the government's developmental objectives.
The measures announced by Erwin are in line with international best practice on the governance of state-owned companies.
A paper published by the World Bank in February 2004 on improving governance for state-owned electricity utilities makes the point that general company law cannot deal with the special problems affecting the relationship between a government (as the shareholder) and its state-owned companies.
The paper, by Timothy Irwin and Chiaki Yamamoto, says additional or different rules to govern that relationship may be useful. It adds that forcing state-owned companies to borrow from private lenders is another way of introducing commercial discipline to public enterprises.
To borrow from private lenders requires parastatals to be creditworthy. However, Irwin and Yamamoto warn that private lenders will only keep a close watch on the performance of state-owned firms if they are made to believe that the government will not guarantee the debt of the state-owned company.
If this is not made clear, private lenders will only worry about the government's creditworthiness.
"Thus the government cannot provide an open-ended guarantee of the utility's debt and may have to require the utility to state, when borrowing, that it benefits from no government guarantee (as happens in New Zealand)."
Erwin may have to clarify what role private lenders will play in improving governance of parastatals.