NEC approves changes to IPBC Act

The Minister for Public Enterprises, Sir Mekere Morauta, said today National Executive Council has approved
changes to the IPBC Act.

“The changes reinstate and strengthen sections of the Act relating to corporate governance, accountability and
transparency and customer service,” he said.

“Given the importance of IPBC in the provision of essential services, the amendments will be drafted and
presented to Parliament as soon as possible.

“The Act is a framework for the delivery of affordable services across the country.

“But that framework has been severely weakened over the past 10 years and as a result service delivery has
gone backwards rather than improved.

“NEC’s changes are aimed at restoring the strength, independence and accountability of IPBC itself and Public
Enterprises.” Sir Mekere said the main changes include:

  • Reinstating Section 6.5 of the IPBC Act, which expressly guarantees IPBC’s independence from political interference. This section was removed by the Somare regime.
  • Adding a new provision allowing the responsible Minister to issue directions to IPBC only after
    consultation with NEC and the directions being published in the National Gazette.
  • Replacing section 9A with a provision enabling NEC to directly appoint directors to Public Enterprises.
    (At present directors are appointed by the IPBC Board, with NEC having the right to reject the IPBC
    Board’s nominees).
    This system was devised as a Somare father-and-son double act to ensure that their friends and
    cronies could dominate boards. Somare Junior as Public Enterprises Minister would nominate the
    Somare team for approval by the IPBC Board and Somare Senior as Prime Minister would rubber-stamp them in NEC. This form of Somare nepotism is one of the reasons our Public Enterprises have
    lost millions upon millions of public money.
    Under the proposed changes, appointments would be recommended to NEC by the Minister – the IPBC
    Board would not be involved. NEC would be required to take into account a candidate’s commercial
    experience and qualifications, the suitability of a candidate for a particular enterprise, and the home
    province of a candidate to ensure a good spread of directors from all provinces and districts.
    At least one director of each Public Enterprise should have extensive knowledge and experience of the
    industry in which the enterprise operates, and at least one director should be a suitably qualified woman
    with a professional or industry background or be from a professional or business organisation.
    Each Board should also have two nominees from professional or industry organisations, similar to the
    IPBC Board. A person should not be appointed to the Board of more than one Public Enterprise, except
    in special circumstances or for ex officio director appointments. Directors should have similar statutoryqualifications and other conditions (e.g., no entitlement to separation or termination benefits) as applies
    to IPBC directors.
  • Amending Section 29.4 to remove the IPBC Managing Director from coverage under the Salaries and
    Conditions Monitoring Committee Act, in line with other IPBC and Public Enterprise staff. No staff of
    IPBC or any other enterprise is a member of the Public Service. All CEOs and staff of IPBC and
    Public Enterprises are required to work on a fully commercial basis.
  • Amending Section 38, which at present enables IPBC to lend money to any Public Enterprise in which
    the State or IPBC has any level of ownership. The amendment will confine IPBC to lending only to
    majority-owned Public Enterprises. If the IPBC wants to lend money to an enterprise in which IPBC has
    only a minority stake and does not control, it must first get NEC approval.
  • Strengthening the transparency of Public Enterprises by changing Section 44, which provides for the
    auditing of the IPBC and its trusts by the Auditor-General. The proposed change would require all
    majority-owned Public Enterprises to be audited by the Auditor-General. This would restore a
    requirement which was repealed by the Somare regime.
  • Amending Section 46B, which requires majority-owned Public Enterprises to get Ministerial approval, on
    the recommendation of the Managing Director of the IPBC, for all commitments in excess of K1 million.
    The proposed change would give more flexibility to enterprises by allowing urgent expenditure of up to
    K10 million if it is in accordance with the enterprise’s annual plan approved by the IPBC Board, and if it
    has been approved in principle by the Managing Director of IPBC.
  • Strengthening the requirement of Public Enterprises to follow due process. There have been problems
    with some majority-owned enterprises not submitting annual plans to the IPBC or not getting the plans
    approved by the IPBC (section 46E); not getting capital expenditure outside the annual plan approved
    by the IPBC (section 46G); or failing to comply with directions issued by IPBC (section 46I), because the
    Act contains no sanctions for non-compliance. Therefore a new section (46J) is to be added, to deem
    non-compliance with section 46E, 46G or 46I by a majority-owned Public Enterprise to be a breach of
    director’s duties under company law and punishable as such, together with dismissal from their position
    of director if the IPBC so desires.

“These changes, taken as a whole, restore IPBC to its primary role as a hospital for the rehabilitation of our ailing
public enterprises,” Sir Mekere said.

“They have been designed as a complete package – no single element should be considered in isolation from
the others – that restores IPBC to its original purpose, and reinforces its independence, its transparency and
accountability, its capacity and its systems and processes.”

Mekere Morauta KCMG MP
Minister for Public Enterprises

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