‘Game changer’ governance model for SOEs

by Kuzeeko Tjitemisa

‘Game changer’ governance  model for SOEs

Windhoek

Public Enterprises Minister Leon Jooste yesterday presented a new blueprint for governing public enterprises.
In terms of the model known as Hybrid Governance Model for Namibia Public Enterprises, which Jooste called a “game changer”, public enterprises will be classified into three categories, namely, Commercial/Economic Public Enterprises, Non-Commercial Public Enterprises and Financial Institutions and Extra-Budgetary Funds.

In terms of this classification commercial/economic public enterprises that make a profit will fall under the Ministry of Public Enterprises (MPE), while non-commercial enterprises such as New Era Publication Corporation and the Namibian Broadcasting Corporation (NBC) will fall under the line ministry.



Other non-commercial public enterprises such as non-profitable educational and training institutions such as the University of Namibia, Namibia University of Science and Technology and Namibia Press

Agency will also be the responsibility of the respective portfolio ministries, while financial institutions (banks) as well the extra-budgetary funds such as Road Fund Administration and Motor Vehicle Accident Fund will resort under the Ministry of Finance. Jooste said the reform of Namibian public enterprises will only be possible if they implement the most appropriate institutional infrastructures.

According to him, after 16 months of research, benchmarking and consultations the ministry has identified the most suitable governance structures for the current conditions,

“The model we are proposing is the obvious next step in the evolution of the governance of PEs and strikes the most ideal balance between being revolutionary yet subtle,” he added.

Overall the PEs irrespective of their classifications will still adhere to the MPE-issued generally accepted common principles of good corporate governance, reporting and remuneration guidelines.

Jooste said he is hopeful that adherence to these principles and guidelines will eventually result in increased effectiveness and efficiencies.

“The MPE will include these non-commercial PEs in its oversight management system that will be made accessible to the portfolio ministry,” he further explained.

As to commercial public enterprises, Jooste said the MPE would henceforth execute the full shareholder’s rights.
“This group of PEs will be wholly accountable to the MPE in terms of commercial and financial operations, and performance,” he stated.

He said the key oversight functions include the appointment of boards of directors, enforcement of good corporate governance through governance and performance agreements, critical review of business and financial plans, approval of annual budgets, issuance of remuneration directives for boards and management, commission of special investigations as and when necessary, and guidance and approvals during restructuring of PEs.

“Performance management will become an integral part of PE governance … with an incentivised remuneration system. A performance management system will be implemented to optimize accountability and transparency,” Jooste said.

He said portfolio ministries will retain full control of industrial/sectoral policy formulation, formulation of sector legislation and regulation of the sector.

According to him this model addresses a current unfavorable structure whereby line ministries control policy and legislative formulation, regulation and implementation – creating a potential indirect conflict of interest.

In 2000, Cabinet appointed a cabinet committee to conduct a survey on the remuneration of boards of directors, CEOs and senior managers. This led to an in-depth study by a consulting firm on the governance of PEs in Namibia. Consequently a report on the “Governance Policy Framework for State-Owned Enterprises” (SOEs) was pronounced in 2001. Between 2003 and 2006 the Central Governance Agency existed under the Office of the Prime Minister. The foregoing activities culminated in the promulgation, in 2006, of the SOEs Act, which was subsequently amended in 2008.

The promulgation of this Act led to the familiar dual governance model, which has existed ever since. Under the dual-governance model the responsibility for monitoring and governing PEs was shared between portfolio ministries and the State-Owned Enterprises Governance Council chaired by the prime minister.

The MPE has been operating within this governance model since March 21, 2015, but according to Jooste the obvious failure of this model has become profoundly evident.

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