The brouhaha over the perceived high salaries of parastatal heads in Namibia continues unabated, but despite that, the country’s SOE bosses feel they are actually underpaid.
Despite CEO’s crying foul over salaries, performance at some parastatals leaves much to be desired because Government is often called upon to rescue SOEs that ought to be making their own money.
In a country where the salaries of ordinary workers are deemed to be relatively low, international studies conducted in the past found that disproportionately high executive remuneration leads to worker discontent and contributes to the reasons for strike action. The strike action often cripples basic services such as schools and hospitals, and the resultant above-inflation wage increases exacerbate the issue of unemployment.
In 2010, the council implemented pay guidelines with maximum caps, although several chief executive officers continue to earn above those caps.
The guidelines, approved by Cabinet, divide parastatals into three categories: Tier 1, Tier 2 and Tier 3.
According to the guidelines, a chief executive officer in Tier 1 should only earn between N$401 199 and N$803 413 annually, while those in Tier 2 should earn between N$451 739 and N$987 197 annually.
If a parastatal falls under Tier 3, its chief executive should earn a minimum of N$709 722 and a maximum of N$1 532 828 but some sources at the council have complained that the majority of 87 parastatal bosses earn way above the prescribed threshold.
The State Owned Enterprises Chief Executive Officer’s Forum chairperson Dr. Audrin Mathe was keen to address several pertinent issues related to SOE CEOs in the country this week.
During a frank and open interview with this publication Mathe reiterated that CEOs are underpaid in Namibia, but he pointed out that “non-performance must never be tolerated in public enterprises”.
What is the importance and relevance of having a CEO’s Forum in Namibia?
I think its relevance rests primarily in the fact that it brings CEOs together and accords us a platform where we can share the best practices. If one CEO is doing better than the other, those best practices can then be transferred to other CEOs so that they can have the needed capacity to lead their respective organisations. And secondly, it really allows us to speak in unison on matters that affect all public enterprises.
We never had a forum where CEOs of public enterprises get together and deliberate on issues affecting SOEs. The forum allows us to discuss issues and raise them with the relevant authorities, in this case the Ministry of Public Enterprises that is dedicated to the proper functioning of public enterprises.
Are you seeing results so far?
We have seen results, there has been a lot of consultations between the government through the Ministry of Public Enterprises and the Forum. For example, there has been discussions of having a code of conduct for public enterprises to improve the governance and proper functioning of public enterprises. That discussion was brought to the Forum by the Minister of Public Enterprises.
Is the Forum mandatory and are the resolutions taken there legally binding?
The resolutions we take are purely for the betterment of public enterprises and each one takes what is relevant to them. It t is for the public enterprise to then go back and incoporate this into their own policies and regulations.
One policy or framework will apply to all parastatals, it is basically up to the public enterprise to work around that and to see how best it can apply to them.
It is not mandatory, it is purely voluntary but the idea is that it would be nice if everybody joins and most of the Public Enterprises are members as we speak.
Where does the Forum get its funds from?
Each SOE pays an annual subscription fee of N$7000 and this is what we use to secure venues for meetings and to facilitate the meetings. The contributions allow the forum to bring together CEOs for workshops and have workshops where we make use of experts to address and educate us on issues pertaining to corporate governance.
Is it true that there is a lot of political meddling in public enterprises?
I have no direct experiences of that. Of course, we have similar sentiments from some public enterprises. This topic is one of the ongoing conversations that we had with Minister of Public Enterprises to formulate measures on how we can keep public enterprises independent of external interferences.
We know who manages these parastatals, they are managed by boards who then have a shareholder who will be the portfolio minister. We cannot divorce government’s involvement in public enterprises because they[enterprises] are acting on behalf of government to enact some of the projects and programmes.
Many professionals claim they would not risk entering the SOE sector because they fear that their credibility and independence would be jeopardised – mainly due to political interference – how do we really strike the balance here?
As I mentioned, you cannot divorce Government’s involvement in the activities of Public Enterprises because we carry out a mandate given to us by government. What we need is credible and competent people. Very capable people must be appointed at these institutions and once that process is completed, they must be given the space to exercise those functions without pressure being exerted on them.
The Ministry of Public Enterprises has issued guidelines on the processes to be followed if heads of parastatals must be suspended or dismissed. These guidelines have helped a great deal and we have seen few suspensions of CEOs and Managing Directors since then. I think it provides stability in Public Enterprises because CEOs know that they are not sitting on the edge of the chair waiting to be suspended.
So what you are saying is that CEOs are not proxies of politicians, is that so?
The process of appointment itself must speak to the fact that only qualified people are appointed, the boards of directors are responsible for appointing CEOs. Whether or not they are acting on instruction of politicians I don’t know. But they[politicians] are the ones that are tasked with the appointment of heads of Public Enterprises.
The issue of relationships between boards and CEOs, why has it been an issue over the years?
Our view is that there has not been proper understanding between what the board is supposed to do and what the management is supposed to do. There has been attempts to clarify hence the creation of the CEOs Forum and also the Directors Forum. We have a platform where Directors and CEOs can come and discuss matters of mutual interest.
This includes issues such as proper delineation of functions and not having a situation whereby CEOs are telling Directors what they must be doing and vice versa. That delineation is very important because once it is clarified you will see less disagreements between boards and CEOs.
How do we deal with non-performing SOEs?
There has to a be ongoing performance appraisal for Public Enterprises to see whether they are reaching their targets, at what cost they are reaching those targets and the relevant measures that must be taken for those who fail to reach those targets. This is the only way you can hold a CEO at SOEs accountable. And before you do that, you need to make sure that there is sufficient capacity at the level of CEO, the level of senior management and a qualified staff complement overall. Once an institution is fully capacitated, CEOs must then take full blame if their enterprises fail to deliver.
What is your stance on the claims that CEOs in Public Enterprises are overpaid?
The study that was commissioned by government itself actually showed that COEs are underpaid. There are discussions around the salary framework and the fact that the overpayment issue is not true. The study that the Minister gave to us to provide our input shows that heads of parastatals are underpaid, contrary to the perception that they are overpaid.
The question of underperforming and skills are two different matters. My view and our view is that you should pay people, whoever they are accordingly, to lure skills to Public Enterprises.
The question of non-performance then comes in where you [CEO] said you needed to do A, B, C and you have not done it – consequences must follow. The fact that people are underpaid cannot be linked with non-performance. However, it is a factor because you must attract people. You will always find people who can do the job, but you cannot attract them. That is why it is necessary to pay people at least at a national average level.
But then we reiterate the fact that non-performance must never be tolerated, not only in Public Enterprises but across the whole working sector. The rules must apply to everyone.
How tightly is CEO compensation linked to performance?
This is again part of the study that was commissioned, the remuneration must be linked to performance. The salary must be commensurate to the set targets.
There has to be a performance agreement signed between the board and the CEO of that specific parastatal. That performance agreement will spell out what is to be achieved. At the end of the financial year, it is up to the board to sit with the CEO and say you have not done what you were supposed to do therefore these are the consequences, or you have done this good job and you get this bonus.
Your stance on capping CEO salaries?
There should not be runaway salaries, the salaries must be affordable and commensurate to the task. We must not be greedy that we [Namibian CEOs]want what CEOs in very developed countries are getting. It must be what the GDP allows and at the same time we must be considerate of the fact that low salaries might deprive Public Enterprises of knowledge because we cannot afford to pay for the required skills.
Once Public Enterprises deliver, the question of salaries will become irrelevant because service delivery will be a given, the same goes for government. No one will worry about how much a minister earns if they deliver on their work.
Challenges that engulf SOEs…?
One is under-capacity at the top and under-resourcing in terms of finance. We cannot achieve our mandate sufficiently if we are not supported financially. And secondly, SOEs must not move away from their initial mandates. That is where the problem comes in because they want to venture into things beyond their mandate.
But do we have the required skills in Namibia?
We certainly have the skills in Namibia, the only question is: are they willing to work for Public Enterprises? But the skill we do have. There are key positions that we are struggling to fill – one is that of chief financial officers – because what they will be paid in the private sector is far more than what even the CEO in the prospective Public Enterprise earns.
The same goes for the media industry, we have trained journalists overtime but there are still key positions, such at the level of editor where skills and experience are rare.
Your view on the PPP Bill and plans to partially list some SOEs…?
We welcome that, the Public Private Partnership Bill is currently under consultation and we have our input. We know that government does not have all the resources, therefore, if the private sector wants to do activities with Public Enterprises it will be a relief on Treasury.
We need to understand the consequences of pursuing partial listing, if the idea is to list it in order for people to buy shares it will be relief to Treasury because it [Treasury] will not have to release funds to bailout parastatals all the time.
What will be on the agenda this year for the Forum?
We want to create a medical fund that covers all employees working at Public Enterprises. Right now most of the Public Enterprises have their own provident funds, medical funds, which are mostly foreign owned.
If we can have that money invested locally, like with GIPF, that money could really be used to develop the country.
Another activity we want to have this year is to have an SOE exhibition, an expo type of gathering, where we will have all Public Enterprises under one roof and the public can come and visit the various stands.