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Saturday 20 April 2019
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SOE turbulence, change needed

There is a need to restructure parastatals to create room for the private sector to partner with government. This is to ensure commercial competitiveness and to subsequently lessen their reliance on government funding, a local economist has stated.
Simonis Storm economist Frans Uusiku asserted that commercial SOEs such as TransNamib Holdings should be restructured in such a way that it allows for the private investor to partner with Government in its operations while also ensuring that pricing structures are fulfilling public service obligations.

 
When asked how government could address the issue of governance and the lack accountability observed at most public enterprises, Uusiku retorted: “Accountability could be better enforced if the roles of SOEs are better streamlined to avoid the duplication of efforts.”
Another economist, Salomo Hei lamented that heads of parastatals do not have the necessary qualifications to lead these entities in a competitive and sustainable manner.
“The guys in charge of the SOEs are sometimes not totally qualified. They do not have the necessary skills to run these institutions. To lead a parastatal you need to understand the business model of the institution that you are leading. You need to understand what the nerve centre of that institution is. If you don’t understand the business model of the SOE, it will be extremely difficult to sustain that business going forward,” charged Hei.
Giving an example of the scandal-prone TransNamib, Hei said: “We have an institution like Trans Namib, the biggest institution that we have in terms of balance sheet. [TransNamib is] a strategic institution in the attainment of NDP5 in terms of logistics. Thus, you cannot have an institution like that underperforming because then all your plans that you have in terms of making sure that this NDP5 is a success will be crippled by the underperformance of an institution like that. So it [TransNamib] has a ripple effect on the whole economy. So that’s why it is important that in the appointments at these institutions, you appoint highly capable and competent people that can run these institutions.”
Hei added: “Do we have the capacity in terms of the people that can run these institutions? Do (Namibians) have the necessary qualifications, the experience and technical capacity to fulfill their mandate in this highly sophisticated industry?”
“There are few Namibians with the necessary academic qualifications. But at the same time, having a masters degree is one thing and the application thereof is another,” he said.
Moreover, over the last decade, public enterprises falling under the Ministry of Public Enterprises have doubled from 48 in 2008 to over 98 in 2017.
When asked whether the rapid increase of SOEs was a cause of concern, he responded: “You need to look at the relevance of these institutions. If you look at our budget, around 70% of it goes towards administration cost and 30% goes to developmental projects. Now what you want to see is that this (budget) gives more leverage to the productive side of the economy. So that you are able to grow and create jobs for the economy. Now if the SOEs are irrelevant, then obviously it is a concern that everyone needs to have because it becomes a burden on the fiscal.” Namibian SOEs employ over 15 000 people.

 
Future of SOEs
Another economist Mally Likukela called for the privatization of SOEs.
However, Likukela was quick to note that before embarking upon a privatization exercise, an appropriate legal, regulatory and institutional framework must be put in place as it may lead to more problems than it intends to solve.
This problems include corruption, inequality, exacerbated social tensions, elitism and state capture, Likukela stated.
In addition, the seasoned Likukela noted with concern the mushrooming of parastatals which are financially unjustifiable.
“It is certainly a concern for government and even a greater one for the economy. The increase in SOE numbers has led to a creation of unnecessary bloated and costly executive structures that cannot be finically justifiable. Furthermore, these SOEs are generally overstaffed and thus government should either consider retrenching, right sizing or wage containment measures.
On the governance of parastatals, Likukela said the introduction of consequence management was critical to address it.
“SOE executives who deliberately neglect their responsibilities must be dealt with harshly so as to instill a sense of accountability and responsibility. It is encumbered upon the Minister of SOE to ensure this. The truth of the matter is that without consequence management, the Minister is not leading, instead he is creating chaos,” bemoaned Likukela.
He added: “It is disheartening to see a failed CEO transferred to another SOE just to see him driving it aground as well and as if that is not enough, such a CEO is rewarded handsomely for ruining it through what is called a ‘golden hand-shake’”

 
Red flags
Speaking at an event in the capital this week, political scientist Andre du Pisani noted with concern the alarming number of public enterprises that are not contributing positively towards economic growth in the country.
“What do we do with the public enterprises that don’t contribute to the economy but put a strain to the fiscals that we need to bail-out like Air Namibia, TransNamib, the RCC and even now our beloved NBC? What do we do? Do we fire them all or close them down?” questioned Du Pisani.
To this effect, the renowned academic has suggested a number of options that government could employ to address the predicament that has seen government spent billions of dollars in SOE bail-outs over the years.
Du Pisani said government can remedy the crisis of underperforming public enterprises by opening up these SOEs and allow ordinary Namibians to buy shares in the state entities.
“Some of them (SOEs) we need to open up to Namibians to have shares and investments in them. There is no reason why we can’t do that. It is not illegal, it is not wrong in principle. We can issue shares and stocks without destabilising or crippling the economy,” Du Pisani added.
He added: “If we restructure the public enterprises and reduce the number and make them more efficient and open some of them for shareholding by Namibians under proper frameworks, we can (will) already empower a lot more people (Namibians).”




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