Windhoek-Minister of Public Enterprises, Leon Jooste, says the total wage bill of N$6.1 billion at State-Owned Enterprises (SOEs) is not sustainable at the current level of performance and financial results emanating from SOEs.
“I am sure you will agree with me ladies and gentlemen that this situation is unsustainable, reflects low levels of accountability and warrants critical targeted interventions by the government and an entirely new mindset,” said Jooste.
Jooste was speaking at the Annual Stakeholders Address Ceremony 2018 attended by the SOEs chief executive officers, managing directors and permanent secretaries of various ministries in Windhoek yesterday.
He said although SOEs were created to provide public services to generate public funds, to increase access to public services and to accelerate economic development and industrialisation, unfortunately, since independence, most of the SOEs have failed to deliver on the mandate they were created for.
Jooste maintained that instead of SOEs supporting the generation of revenue for the State,
they have become a burden to the State by depending on annual government subsidies and guarantees to sustain their operations.
He said for 2017/18 alone, SOEs received a total allocation from the budget of more than N$4 billion, while the total debt of SOEs is already about N$43 billion (which is 25 percent of the gross domestic product (GDP)).
“The return on assets of the PE (public enterprise) portfolio is negative/loss-making (more than N$150 million per annum),” said the minister.
Furthermore, Jooste reminded those in attendance that the ministry had developed a hybrid governance model, which was approved by Cabinet in 2016, and issued several common corporate governance guidelines and directives.
He said this governance model would adjust the existing governance infrastructure imbalances by differentiating between the role of the State as policymaker/legislator, regulator and owner.
“But we are cognisant of the fact that we still have a dual governance model in place, where PEs are required to report to both the line minister, as stipulated in their founding Acts and to our ministry as stipulated in the PEGA Act No. 2 of 2006,” he said.
Jooste said managing strong and open relationships with boards, line ministries and CEOs/MDs is key to the success of SOEs’ transformation and to transforming the economy. He said because the ministry was created to support SOEs and without a strong network, open and transparent communication, between our ministry and SOEs all efforts may be fruitless.
“It is people that make things happen, not the laws and policies,” he said.
He said this is one of the reasons why he called for this annual address, which would become an annual event from now on.
“I called you as our key stakeholders to share the state of our SOEs, as you see it reflected in the fact sheet, our transformation agenda and the new way forward,” he said.
“It is the first step to strengthening and improving our relationships with you and to communicate with you more deliberately and more fluidly,” he added.
Jooste said Namibia has more than 300 public entities of which 71 are listed. Of the 71 listed entities, 38 can potentially be classified as non-commercial, 22 as commercial, and 11 as financial institutions.
He said the SOEs operating in the energy, transport, communications, water, education, and financial sectors account for more than 90 percent of the combined entities’ assets.
“SOEs provide over 5 percent of total employment in the country,” he said, adding that the total asset value of the portfolio at the end of December stood at around N$91 billion.
But he said the overall return on these assets is negative, meaning that there is a huge dependency on shareholder support for sustainability.