State Dependency Cripples SOEs’ Performance

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State-Owned Enterprises Governance Act 2005: The way forward for State Enterprises’ improvement

By Clemens Kashuupulwa

During the period 1995-2005, the Government created over 50 state-owned enterprises [SOEs]. The creation of so many SOEs in a short span of 10 years came about as a result of the Government’s decision to adopt a commercialisation policy. This policy was occasioned by many factors following the economic transformation of the country into a democratic state that is to be administered under the principles of “good governance” to ensure rapid growth in the economic sector in which the public and private sector play a complimentary role in the development of the country in all sectors of life.

By so doing, Namibia was on the right track to end foreign control over the economy while reducing the size of the country’s public service and thereby cutting down on the Government’s wage bill. This meant commercialisation of several functions and services previously rendered to the public through Government ministries was necessary and perceived as one of the ways and means to trim the large Government bureaucracy to improve effective service delivery.

Also, the question that Namibia faced was the challenge to recruit the former disadvantaged people into the civil service in addition to the one that existed in the apartheid civil servant system. This led the Government to commercialise over 50 SOEs to create job opportunities for people previously excluded in the apartheid-colonial administration and private sector.

This clearly indicates that Namibia’s bloated public services were born out of the Government policy of national reconciliation by which the Government deems “it necessary to retain the former public servants in the Government and recruited new servants from the ranks of the previously excluded majority of the population”.

However, the question remains whether Government has achieved results among the more than 50 state-owned enterprises created in the country.

What problems and challenges have the Government faced and where is the Government today with products and services delivered under the SOEs sector?

The rapid transformation of so many Government functions and services into SOEs had many challenges. SOEs did not go hand-in-hand with an equally vital process of a fast-tracked moulding of a managerial competent cadre of Namibians to efficiently run the newly created commercial entities.

The apartheid legacy, which denied blacks access to education, lack of suitably qualified and experienced Namibian people for executive at board membership position in the proliferating state-owned commercial entities was experienced. Most of the young men and women appointed to the managerial positions of SOEs “lacked the requisite proficiency to efficiently run these enterprises” accordingly. Hence, it did not take long for inefficiency to be noticed in the operation of many of these SOEs. As the management challenges resulting from the unhealthy combination of an increased number of SOEs and shortage of management competency, inefficiency exacerbated by lack of “good corporate governance” began to be pronounced also.

At independence on 21 March 1990, there was no well-defined and effective anti-corruption and pro-good governance ethic in Namibia. What existed were only three important objectives by the Government to eliminate apartheid colonial administrative practices, the dramatic changes of the economy system to benefit also people excluded from the old dispensation and to ensure access to political power to reduce poverty and unemployment in the country. “Good corporate governance” is not only the state of great comfort and extravagant living, but also a basic requirement for development.

In business terms “corporate governance” is perceived as a system by which organisations are controlled and directed to achieve certain goals. It is not only “a function of direction and leadership control, risk management, transparency and accountability that are underpinned to business that is socially and responsible” but also to business that is sustainable into the future and strives to minimise any impact that affects the environment and society”. It is about balancing of all business competing forces in an “effective manner in giving decisive and effective leadership”.

Thus a good leader in a corporate institution has to think and act on the basis of transparency, discipline, independence, accountability, responsibility, fairness and social responsibility.

Many SOEs in Namibia failed to attain their goals because the concept of “good corporate governance” has been compromised by corruption, the process of abusing the office for private gain that has undermines the growth of some SOEs because of poor corporate governance.

Corruption in all its forms is an evil deed to the development of any country and its people. It entails high economic and social negative impact as it “increases transaction costs, reduced public revenues, resources allocation investment and economic growth and defeat the rule of law”. This trend in the development of SOEs is already noticed in Namibia and makes many SOEs inactive to delivering products and services to the people.

The most serious challenge facing “good corporate governance” in many SOEs in Namibia was the value system of the bureaucracy and the shortage of trained and experienced indigenous personnel. These made SOEs in Namibia between 1995 to 2005 often inefficient and corrupt with saddled and cumbersome administrative procedures. As a result very few SOEs out of more than 50 were making profits. These include Telecom Namibia, Nampower, Roads Authority, Namport and Namibia Wildlife to list but a few.

For these reasons, during the 2000-2001 financial year, several Presidential commissions of inquiry drew attention to the inefficiency of many SOEs, citing instances of poor management, theft and corruption leading to many state-owned companies operated at a loss because they were “constantly subject to political pressure and could not be run on business principles as some of them were also hit by the shortage of qualified and well experienced manpower.

Another challenge for disappointing poor performance of SOEs in Namibia, apart from indifferent staffing and poor financial management, is the unsuitability of some men and women appointed to the board of public enterprises. Some of them “owe their positions to blatant political patronage” while others are civil servants who though competent administratively lack innovative and creative business acumen.

Unless there is a change in the practices of managing SOEs in Namibia, in this manner the status quo remains unchanged for many SOEs in Namibia to delivering better products and services to stimulate the economic growth of the country.

Namibia is a country of less than two million people that is blessed with all kinds of natural resources that if managed accordingly after 17 years of independence now can make Namibia to take a bold step to reduce poverty, hunger and unemployment. The economic activities in Namibia during 2004 “started picking up with agriculture, mining, construction, manufacturing, tourism and retailing contributed positively to the growth in the economy while fishing, water and electricity performed dismally”. This brought the total value of “goods produced and service provided within a country during one year [GDP] growth to 7.4 percent compared to 5.8 percent of 2003”.

Though the “first quarter of 2007 showed also good performance with mining, construction, hotels and restaurants, transport and communication, electricity and water, wholesale and retail trade in their rates of growth”, Namibia could have done better to improve its economic activities if all state enterprises were well improved to add value to the country’s income from tax-payers and other sources of revenue collections.

This is very important to the growth of the economy of Namibia because the fishing sector that was one of the main contributor to the improvement of the economic growth of Namibia was recorded declines in its performances as a result of “raising operation costs such as fuel and labour costs as well as lower realised prices and unfavorable catch, mix and market conditions such as competition from aquaculture fish and the lackluster and the economic performance of the Euro Zone, which is the key export market”. The fishing industry has experienced also “the low fish landings for most of the major species such as hake, crabs, pilchards, horse mackerel and orange roughly” in 2005.

Namibia has over 50 SOEs – 16 commercial SOEs, four media, seven financial, 15 regulatory, six welfare, 12 educational state-owned enterprises and more other trust funds like, the Game Production Trust Fund, Namibia Institute of Pathology, Environmental Investment Fund of Namibia and the Namibia Fish Consumption Promotion Fund.

In business terms of maximising profit, these SOEs could have a supplementary advantage to the income revenue collections of Namibia that by now could have address the social, economic and the security needs of the country outside the state revenue funds.

It is high time the Government shift from perceptions of slothful and wasteful corporate behaviour to “good corporate governance” to ensure that state enterprises are well-managed for vital delivery services while using the power of good corporate governance to retain efficiency, lawful corporate behaviour and growth as good example to share progresses with those that unable to deliver products and services since their inceptions.

For the past few years, Telecom Namibia, Nampower, Road Authority, Namport and Namibia Wildlife were recorded to have delivering exceptional turnover among other state enterprises. This is a big challenge to the Government, the “main shareholders in many of these state-owned enterprises”.

One would ask where the problem lies with the other 30 state-owned enterprises not on record to have broken-through in products and service delivery. The Government can no longer close its eyes with SOEs that are poorly delivering products and services after it introduced appropriate reform on SOEs in Namibia in 2005.

It was the expectation of many people that the reform of SOEs in 2005 could review the remunerations of corporate boards and managements with a view to commensurate with the performance of the enterprises.

Also, the introduction of the State-Owned Enterprises Governance Act 2005 would bring meaningful change in the reduction of corrupt practices and theft in Namibia, but this practice is still within the Social Security Commission with some people still questioned on “charges of corrupt practices and theft”.

With the cooperation of the public and the political will of President Hifikepunye Pohamba to continue his stand for zero tolerance against corrupt practices in Namibia, the Government can still expect good returns from all SOEs to effectively address the long outstanding challenges of unemployment among the youth and women, improvement in education, high rate of crime, HIV/AIDS, hunger and poverty.

Clemens H Kashuupulwa is an MBA candidate and is currently the Governor of Oshana Region.

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