Overview
This study by Sabina Luputa and Jason Mwanza (University of Zambia) proposes an ideal corporate governance model for Zambia’s State-Owned Enterprises (SOEs). Published in the Open Journal of Social Sciences (Vol. 10, pp. 419–440), the paper examines weaknesses in existing governance systems and suggests two contextual models tailored for Zambia’s mixed-ownership and fully state-owned enterprisesThe Ideal Corporate Governance ….
Background
Zambia has 47 SOEs, mostly operating in strategic sectors like energy, transport, finance, and communications. Despite their importance, SOEs face low profitability, weak oversight, and inconsistent governance due to overlapping statutes and ministerial interference. Only 15 SOEs were profitable, and just 9 declared dividends in 2018, illustrating chronic inefficiencies linked to poor governance practicesThe Ideal Corporate Governance ….
Corporate governance is regulated by multiple instruments—the Companies Act (No. 10 of 2017), Securities and Exchange Commission (SEC) Code, Lusaka Securities Exchange (LuSE) Code, Bank of Zambia (BOZ) Regulations, and Institute of Directors Zambia (IoDZ) Guidelines—which often conflict, creating a fragmented legal environment for SOEsThe Ideal Corporate Governance ….
Problem Statement
The study found that SOEs lack a uniform governance model, resulting in inconsistent practices and blurred accountability. Ministers, acting as shareholders, often appoint directors based on political loyalty rather than merit and interfere in operations, weakening board independence. Furthermore, SOEs are expected to perform social service obligations without adequate funding, leading to financial strainThe Ideal Corporate Governance ….
Methodology
The researchers employed a phenomenological qualitative approach, conducting in-depth interviews and focus group discussions with 39 board members and managers from both profit-making and non-profit SOEs. Data were analyzed using semantic content analysis and Colaizzi’s seven-step phenomenological framework to identify recurring governance themesThe Ideal Corporate Governance ….
Key Findings
Six major challenges emerged across all enterprises:
- Weak Corporate Governance Systems – Lack of adherence to transparency, accountability, and professionalism in SOE management.
- Fragmented Legal Framework – Overlapping laws and inconsistent oversight across ministries.
- Ministerial Dominance in Board Appointments – Boards lack independence; political interference undermines governance.
- Underfunding and Conflicting Mandates – SOEs must pursue profitability while fulfilling unfunded social obligations.
- Operational Restrictions – Limited autonomy in recruitment, pricing, and investment decisions.
- Weak Disclosure and Accountability Mechanisms – Absence of clear reporting and remuneration guidelinesThe Ideal Corporate Governance ….
A director summarized the situation:
“The government ought to adopt a policy that places commercial competitiveness as a national priority… We must clearly define the roles of all parties in the structure.” — Director respondentThe Ideal Corporate Governance ….
Board Composition and Reform Proposals
Respondents called for reforms based on international best practices, particularly South Africa’s King IV Report and OECD Principles. They recommended:
- Smaller, skills-based boards (7–9 members).
- Establishment of board committees (audit, remuneration, risk, and ethics).
- Transparent, merit-based nominations process overseen by independent committees.
- Enforcement of gender equality and inclusion of technical experts on boardsThe Ideal Corporate Governance ….
Proposed Models for Zambia
1. The Hybrid Model (Mixed Ownership – 51% State, 49% Private)
- Ownership: Government holds 51%; private investors 49%.
- Governance Structure:
- A Board of Supervisors oversees management.
- Management Board includes CEO, company secretary, and directors.
- Independent directors appointed using IoDZ guidelines.
- Principle: Separation of ownership, oversight, and management powers, with stakeholder representation to ensure transparency and competitiveness.
2. The 100% State Shareholding Model
- Ownership: State/IDC is sole shareholder.
- Governance Structure:
- A Board of Directors acts as steward for the appointing authority.
- Committees: Audit, risk, remuneration, and technical committees.
- Nominations Committee: Ensures professionalism and gender inclusion.
- Principle: Strengthens meritocracy, independence, and oversight while reducing ministerial interference.
(See diagrams on page 16 — Figures 1 and 2 — illustrating the proposed hybrid and 100% ownership models, showing the relationship between ownership, board committees, and management oversight)The Ideal Corporate Governance ….
Discussion and Implications
The study concludes that Zambia’s SOEs suffer from political control and absence of structural autonomy. The proposed models provide a context-specific governance framework balancing government oversight with professional independence. The approach promotes:
- Stakeholder representation (not just shareholder primacy).
- Gender balance and merit-based appointments.
- Reduced political interference and improved fiscal discipline.
- Enhanced board accountability and transparency.
These recommendations align with the OECD (2021) standards on competitive neutrality and transparency in SOE governance.
Conclusion
Zambia’s SOEs face structural inefficiencies due to political interference, inadequate governance frameworks, and fragmented legislation. The study’s proposed models — Hybrid Ownership and 100% State Shareholding — offer practical pathways to professionalize SOE governance, enhance board performance, and increase profitability.
If implemented, these frameworks could transform SOEs into accountable, commercially viable, and socially responsible institutions, contributing significantly to national economic developmentThe Ideal Corporate Governance ….
Citation
Luputa, S., & Mwanza, J. (2022). The Ideal Corporate Governance Model for State-Owned Enterprises in Zambia. Open Journal of Social Sciences, 10(11), 419–440. DOI: 10.4236/jss.2022.1011027.
