… even as they fail to be profitable
By Megameno Shikwambi
The total wage bill for Namibia’s state-owned entities has clocked N$8.5 billion per annum while most of them have dismally failed to be profitable, despite receiving huge State bail outs.
This has been disclosed at the Public Enterprises Conference which rolled to life this week at the coast with delegates putting heads together on how best to bandage the state coffers from further bleeding.
This total wage bill covers an estimated 17 464 employees and translates to 28% of the total Public Enterprises expenditure of N$30 billion per annum.
The conference disclosed that this figure is beyond the average 27%, achieved by other African countries and remains of concern to the ministry.
Budget indicators show that for the 2018/19 financial year alone, Public Enterprises received a total allocation from the budget of N$4,024 billion.
“… but what is even more concerning is the fact that Commercial Public Enterprises, entities that are supposed to be profitable, received N$1.41billion,” said Minister Leon Jooste.
In some instances, instead of Public Enterprises supporting the generation of revenue for the State, they have in fact, become a burden to the State by depending on annual government subsidies and guarantees to sustain their operations.
There is a positive side, however.
Jooste has disclosed that the profitability of Commercial Public Enterprises improved from N$840 million to N$1.9 billion from 2016/17 to 2018/19.
He said that of the financial institutions and extra-budgetary funds improved from N$633 million to N$760 million over the same period.
Non-Commercial Public Enterprises showed an improvement of a negative profitability of minus N$1.56 billion to minus N$1.45 billion.
This gives us a total portfolio performance of an improvement from minus N$87 million to a positive N$1.21 billion, said Jooste.
The conference included several private sector speakers in the program to hear how they were approaching performance management within their businesses. South African Minister of Public Enterprises Pravin Gordhan also addressed the conference on reforms in South Africa.
Said Jooste, “this makes perfect sense since the fundamental commercial principles are all very similar and are made up of the same elements. Something that makes me particularly happy is that we are taking this specific inclusive approach where the ministry will ultimately own the outcomes of this conference together with you, our Public Enterprises.”
He said Public Enterprises in Namibia were created to, amongst others, provide public goods; generate public funds; increase access to public services (while maintaining efficiency and effectiveness); and accelerate economic development and industrialisation.
“It is only once one understands what is wrong and what has caused it that one can conceptualise appropriate solutions. The ministry has therefore analysed the core reasons for the failure of Public Enterprises and determined that the core reasons are as follows: inappropriate governance/ownership models (decentralised and then a dual-governance system), an inappropriate legal framework and not equipping line ministries with specific specialised skills to perform the functions of a professional shareholder,” said Jooste.
While Jooste’s Hybrid Governance Model got approved by Cabinet in 2016 and the Public Enterprises Governance Act, Act number 1 of 2019 got promulgated this year, Jooste said the next step is to finalise the structure of the Ministry.
He said this is “to ensure that we are adequately capacitated to perform the complex functions required from a professional shareholder and then to finally implement the much-anticipated new legislative framework”.
This will then mark the transformation of the State as shareholder into an active, professional shareholder to create wealth and to protect the interests of the State as representative of the people. Our aim is to change manage a complete mind shift where the corporate DNA of our Public Enterprises are transformed into a performance orientated culture,” said Jooste.
To achieve this, Jooste said five components are needed to work in sequence namely:
1. The new Integrated Strategic Business Plans (ISBP) that will have to be approved by the ministry and in the case of Commercial Public Enterprises we will only approve bankable ISBPs,
2. Performance Agreements between Board members and the minister and the Board and the Chief Executive Officer with Key Performance Indicators aligned to the ISBP,
3. Incentivised remuneration,
4. Performance management systems within the Public Enterprises and,
5. Consistent Performance evaluation by the Ministry.
“In the case of Public Enterprises, Performance Management can become more complex compared to their private sector counterparts because due to the very nature of the Public Enterprises, we need to monitor performance in a very unique manner.
They must be evaluated in a holistic manner where environmental, intellectual, social, infrastructure and financial impacts are evaluated.
What matters is to measure what impact a Public Enterprise is having on society?” he said.
Jooste said over the past four years his ministry conducted numerous international benchmarking missions.
He said these have all proven to be of extreme value.
“It has given us the opportunity to learn from other countries’ best practices but even more importantly, it has given us an opportunity to learn from their mistakes!
It has also surprised me to find that countries face the same challenges when it comes to Public Enterprises, the only difference being the depth or degree of the challenges that vary from country to country,” he said.