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Saturday 20 April 2019
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Why SOEs fail

 
 
Screen Shot 2016-09-02 at 11.53.58 AM Screen Shot 2016-09-02 at 11.54.11 AMFlawed governance models
Weak shareholder
Inability to appoint competent boards
SOEs cannot grow if they are overstaffed
 
By Mathias Haufiku
 
Recording profits on their books continues to be a pipedream for most parastatals in Namibia, a situation partly brought about by the fact that some have been run on a political model rather than on a business model. In fact, parastatals have not had professionals running the boards but they have been staffed proxies and cronies representing the interests of their masters.
 
Minister of Public Enterprises, Leon Jooste this week revealed the key reasons why he thinks parastatals in the country continues to lag behind when it comes to performance. Jooste listed flawed governance models, a weak shareholder [Government] and legacy problems as the hampering factors.
 
Speaking during a breakfast meeting hosted by PricewaterhouseCoopers (PWC) this week, Jooste pulled no punches, as he boldly stated that Government’s failure to keep the affairs of parastatals in check is also part of the problem. Having recently introduced the “Hybrid Governance Model” in a bid to turn the fortunes of parastatals around, Jooste lamented the dual governance models adopted by Government over the years.
 
“Government has attempted to govern parastatals through a flawed governance model because the dual governance system is the worst and it has not worked anywhere in the world,” he charged.Jooste also questioned Government’s inability to appoint competent boards over the years instead of waiting for the situation to deteriorate severely.“Although legacy problems are also to blame, one can’t help but ask where the shareholder was? Why did the shareholder not appoint the right boards?” he questioned. Jooste is in agreement that SOEs are key to grow the country’s economy, but indicated that such growth cannot be achieved in the absence of effective governance.
 
He also said some parastatals do not seem to know their mandate. He also bemoaned the fact that some parastatals employ more than double the number of employees employed at a similar company that provides the same services operating in the private sector. The minister further explained how hard it is for the ministry to find suitable candidates to serve on boards.“We are competing with the private sector and it is a challenge. We can also not approach people if they do not apply or avail their services,” he said. Powercom chief executive officer Alisa Amupolo, who was also one of the panelists, said “legacy problems” continue to pose a great challenge to parastatals.“Most parastatals were departments within ministries in the past, the only thing that changed is that they got new mandates and became independent entities but there is still a need for cultural transformation because it is mainly still the same staff complement,” she said. She added: “It is not to say these people are not competent, but the processes are way different when compared to operating in a department.”
 
Meanwhile, International Advisor, Investor & Public Speaker, Jan Sturesson, during an exclusive interview with The Patriot on the topic of SOEs underscored the importance of appointing the most appropriate boards and the need for Government to premise focus on innovation. “You need to know why they [SOEs] were formed, is it to earn money or to support social dimensions and improve the people’s lives? Selecting board members is key and it must be known that that boards should be an independent arm that does not interfere with operations of the company,” he advised.
 
At present, many professionals are sceptical when it comes to joining SOE boards fearing that their reputations might be tarnished by the negative publicity that surrounds SOEs Sturesson said: “The board should be a strategic controlling body and people should not just think of their own brands, you have to serve if you know you can make a difference. Do not ask what is in it for me , but rather ask what is in me for this board.” He urged board members to desist from being silent during board meetings and make their voices heard. SOEs cannot grow if there are too many people employed, the Swedish expert said, it is time some positions are made redundant to create real jobs to foster entrepreneurship. “There is competency in the nation to make smart procurement processes of how to insource talent and capital to grow the economy, therefore if the commitment is there to design new processes things can change. It is all about the will to take risks because the opportunity cost for not taking risk is more costly than not trying,” he said.
 
Namibia’s global footprint
Sturesson suggested that Government start thinking forward when making decisions instead of basing decisions on short-term gains. “Too many countries are looking to get the right statistics and labels when it comes to international rankings while the focus should be on securing the future by taking decisions that benefit the populace,” he said. He also called on government to expand the country’s reach through the international network by appointing trade, knowledge and innovation ambassadors to help market the country by creating relationships at the highest levels. “Namibia is not much known abroad and it is a pity. You should have your own narrative about the future that will act as a pull factor for investors,” he said, adding that leadership and good coordination is also needed to grow the country’s profile.
 
Sturesson added: “There is a need to create an entrepreneurial act that allows for government to give incentives to entrepreneurs so that people can be motivated to use their skills and to create jobs for others. Government must also open up all data and information which can be accessed by entrepreneurs. This will be good for the consumers because it will open up competition and subsequently drop prices of goods and services that are used by consumers.”He also cautioned against creating safety nets in the country that make people dependent on government. “Make sure the nation is not a welfare state because too many grants can be a problem. We should work on ways to adopt caring capitalism ideals instead of trying to have a socialist society without any descriptions on how people will be empowered,” he proposed.
 
“Namibia needs to believe in itself and not sell itself off cheap by standing in the shade of others. It is time to communicate the Namibian story. I know it is hard to release yourself from your history, but maybe it is time to be brave and take decisions, which will be painful in the short-term but helpful in the long-term.”



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