… Government turns to SOEs for a bailout
…Taps into GIPF and road fund reserves
Roads Contractor Company(RCC) faces closure if found not cost-efficient.
The company has been struggling to stay afloat in recent years, but Government claims the probe into RCC’s operations are part of a wider investigation within SOEs to see which ones must remain in operation and which should be closed. Cabinet sources have indicated that finance minister Calle Schlettwein and public enterprises minister Leon Jooste are pushing for RCC to close shop because of its poor performance and inability to fully execute its mandate.
However, both ministers have refused to pronounce their stance on the matter, saying all the necessary procedures required to make a determination must be concluded before doing so. Schlettwein this week confirmed the probe into RCC, saying: “We got a mandate from Cabinet to re-evaluate RCC’s mandate and cost-efficiency and if it so shows that they are expensive, we will take a decision whether they will remain or not.”
The government seems to be serious about taking costly state-owned enterprises (SOEs) in hand. This follows years of complaints from business and the public regarding entities that are continually bailed out in order to stay afloat.
The country has more than 70 SOEs.
In his state of the nation address this year, President Hage Geingob said partial privatisation of SOEs is an option that could see the state continuing to control SOEs that are seen as strategic, while attracting much-needed investment and private sector skills.
With details sketchy about which ones are targeted for disposal or closure, Schlettwein maintained that the SOE sector is being overhauled to root out inefficient SOEs that “are a drag in the budget”. He did not say how long the probe will take.
“If they [RCC] are inefficient and a drag in budget, and their services are more expensive than what we can get from the private sector, which we believe is the case because they have price preferences whereby they build and maintain roads for 30 percent more expensive than the private sector. We allowed that to help them to generate business opportunities for small businesses in the construction sector but RCC ended up outsourcing the projects to foreign entities, so they have not fulfilled the mandate to bring about an SME development strategy,” he said.
Jooste, on his part, revealed that during the deliberations of the Cabinet Committee on Treasury (CCT) since April last year many opinions have been raised by various members on whether certain parastatals are feasible or strategically important or not and these are part of normal debates and discussions.
“The RCC has been one of those but not the only one. Government has not formulated a position on the RCC yet. We are in the process of evaluating the Strategic Business Plan for which we require outstanding information and once we have finalised this evaluation, the item will be discussed in the CCT and then submitted to Cabinet,” he said.
Responding to claims that he is supporting a move to close down RCC, Jooste said: “We have requested a significant amount of critical financial and operational information and I cannot formulate a final opinion until we have received this information. I will never make or support such a fundamental decision or proposal without facts and thorough due diligence. We need to make proposals based on appropriate technical facts and with due regard to the social and political implications thereof.”
RCC recently stated that it needs at least N$300 million from government to achieve a net asset base. Questioned about this request, the minister said: “The fact that this has been submitted implies that it is receiving consideration but we will not support this until we are convinced that it is based on a feasible business plan based on accurate projections and not assumptions as is often the case.”
He added that Government will only support feasible business plans and not any marginal plans where the risk of additional requests for funding is a real threat.
The tables have turned as far as bailouts are concerned in Namibia, as Government continues to receive financial assistance from parastatals to stay afloat.
With Government currently owing companies in the construction industry over N$1 billion for services rendered, Schlettwein was quick to point out that companies in the construction sector owe Government about N$1.4 billion in unpaid taxes.
Schlettwein said had taxpayers honoured their tax obligations timeously “cash flow would not have been a problem in Government”.
In a bid to allay any fears that Government will not honour its financial commitments, Schlettwein announced that the Road Fund Administration already started paying invoices of up to N$318 million from its accumulated cash reserves. This amount would rise to as much as N$450 million with appropriate adjustment on the non-priority or uncommitted expenditure on Roads Authority budget that is financed by RFA.
Government also had consultations with the Construction Industries Federation at which Government has communicated its plans for meeting the payments. Immediate settling of some of the invoices through the Road Fund Administration and continued payments over the budget year have already commenced and are a reflection of honouring the payment plans in the spirit of the consultation.
Schlettwein, however, expressed disappointment over the CIF’s ultimatum for the unpaid invoices to be settled by 15 December saying it goes against the agreement reached between Government and CIF.
Schlettwein also announced that the accumulative tax figures owed by taxpayers in the country stands at N$19 billion while the principal tax debt countrywide currently stands at N$4 billion.
But despite the cash flow problems, Cabinet announced yesterday that it has authorised Treasury to write-off penalties and interest that has accrued on outstanding tax of taxpayers.
This means that as much as N$15 billion could be written off.
Schlettwein further admitted that Government has been too lenient when it comes to collecting taxes over the years, especially when considering the low rate of prosecution.
In this regard, taxpayers settling their principal tax arrears up to 20 percent of interest accumulation, will benefit from a waiver of the penalty obligations.
He called on taxpayers affected, to take immediate steps to approach the Receiver of Revenue for repayment plans. The Receiver of Revenue will make an announcement regarding the details and the commencement date of this incentive and debt recovery programme.