OUTA’s Legal Battle Could Finally Hold All State-Owned Entity Boards Accountable

For years, South Africans have watched the same names reappear across state-owned entities, from Eskom to NSFAS, even after scandals and mismanagement have cost taxpayers billions. Now, one organisation is taking a bold step to change that pattern once and for all.

The Organisation Undoing Tax Abuse (OUTA) has launched a landmark legal challenge in the Pretoria High Court, targeting what it calls a dangerous loophole in the Public Finance Management Act (PFMA), one that protects certain state executives and board members from facing the same accountability that applies to company directors.

If OUTA wins, it could fundamentally change how South Africa deals with mismanagement at state-owned entities (SOEs) and public bodies and send a serious warning to those who treat public money like a private purse.

The legal gap that shields top officials

At the heart of the case is a legal technicality with massive real-world consequences. Under South African law, only directors of registered companies, including state-owned companies (SOCs) like Eskom, Transnet, and SAA can be declared delinquent directors under section 162 of the Companies Act.

That means individuals who lead other state-owned entities, such as NSFAS, SETA, or various government agencies, cannot be subjected to the same legal action, even when they grossly mismanage public funds.

“This legal gap means that the accounting authorities of SOEs that are not registered companies are automatically protected from delinquency actions,” explained Advocate Stefanie Fick, Executive Director of OUTA’s Accountability Division. “That’s unfair, because it holds them to a lower standard of accountability.”

In simple terms: some state executives can be legally punished for financial misconduct, while others, doing the same thing, cannot.

OUTA takes it to court

On 20 August 2025, OUTA filed its case against several government departments, including the Minister of Finance, the Minister of Trade, Industry and Competition, and the Companies and Intellectual Property Commission (CIPC).

The organisation is arguing that sections 83(4) and 84 of the PFMA are unconstitutional because they do not go far enough to punish misconduct. While the PFMA allows for suspension or dismissal, it doesn’t carry the weight of a delinquency declaration, a legal status that can ban someone from holding a senior role ever again.

OUTA wants the court to give Parliament two years to fix the law and in the meantime, it’s asking for section 162 of the Companies Act to apply to all accounting authorities of public entities, not just those registered as companies.

If Parliament fails to act within the deadline, OUTA wants this interim remedy to remain permanently in force.

Why it matters for accountability

This case goes far beyond legal semantics, it’s about whether public officials can keep moving from one department to another after damaging an institution.

“Compromised officials are repeatedly recycled through government departments and entities,” said Fick. “By fixing this gap in the law, we can give civil society another tool to hold such individuals to account and protect the public purse.”

South Africans have seen this movie before: disgraced officials quietly reappointed elsewhere, investigations that go nowhere, and endless commissions of inquiry that end with reports gathering dust. OUTA’s case could be the first real chance to close that revolving door.

Lessons from Dudu Myeni and SAA

OUTA has already shown how powerful delinquency actions can be. In 2020, it successfully had former SAA chairperson Dudu Myeni declared a delinquent director for life a decision confirmed by the Supreme Court of Appeal in 2021.

That victory was only possible because SAA is a registered company under the Companies Act.

“Had Myeni been at an SOE not registered as a company, we wouldn’t have been able to act,” said Fick. “She most likely would not have been held accountable for the enormous damage she caused.”

The same legal limitations have prevented action against individuals linked to NSFAS and the Services SETA, both of which have faced corruption and mismanagement scandals.

Public support and social reaction

On social media, many South Africans have welcomed OUTA’s move, describing it as “long overdue.” Hashtags like #AccountabilityForAll and #FixThePFMA have surfaced on X (formerly Twitter), with users pointing out that billions have been lost to SOE mismanagement over the years with little consequence.

Others have expressed cautious optimism, noting that while South Africa has strong anti-corruption laws on paper, enforcement remains the real test.

Political analysts have also noted that OUTA’s case puts pressure on Parliament to act proactively, rather than waiting for yet another financial scandal to force change.

The bigger picture: protecting the public purse

If the court rules in OUTA’s favour, it would extend the same accountability standards across all SOEs, ensuring that board members and executives can no longer hide behind the PFMA’s weaker disciplinary system.

“This is about fairness and accountability,” said Fick. “If the government fails to hold corrupt officials to account, civil society must have the tools to do so. Public money must be protected, and those who abuse it must face real consequences.”

In a country still recovering from the deep wounds of state capture, OUTA’s legal battle could mark a turning point one where South Africans finally gain a stronger mechanism to demand integrity from those who manage the nation’s wealth.

For now, the spotlight is back on the courts and on whether justice can finally close the loopholes that corruption has long exploited.

{Source: BusinessTech}

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