SOEs need adequate capitalisation
While many State-owned enterprises (SOEs) may have underperformed in the past with inefficient or inept service delivery, these government-owned companies still render important services to the nation and should be adequately capitalised.
Without adequate capitalisation to fulfill their mandates these SOEs are essentially being set up for failure, chief executive officer of the Road Fund Administration (RFA) Ali Ipinge said yesterday.
Ipinge was speaking in his personal capacity during a presentation by the Institute for Public Policy Research (IPPR) and the Hans Seidel Foundation, on SOE Governance in Namibia. The paper that emanated from their research is entitled, ‘Will a hybrid system work?’
The IPPR paper, the third paper in the Institute’s anti-corruption research programme, was compiled by research associate Max Weylandt.
The hybrid system referred to in the title of the paper refers to many SOEs being centralised under the Ministry of Public Enterprises, while others are under the control of their line ministries.
“The implementation of this new system requires amendments to the Public Enterprises Governance Act and presumably to the founding acts of many public enterprises. As these have not yet been finalised, some specifics of the new regime remain unknown. This report will analyse what we do know about the new system and highlights issues that will need to be addressed under the new framework if the reform process is to be successful,” said Weylandt.
He added that while the proposed hybrid governance model is a step in the right direction, as it follows an international trend of centralisation of SOE oversight, which can lead to better management of the sector, he cautioned that the hybrid nature of the new system does not mean that better governance is not guaranteed.
“Many SOEs will still fall under line ministries, several of whom have failed at ensuring good governance in the past. Ensuring they also live up to high standards will be a difficult task.
Several specific governance measures should be included in the law, including language on conflicts of interest, asset declarations for certain SOE employees and accounting practices.
“Transparency will be key to achieving good governance in the sector. In the past, the public was kept in the dark about what happened at SOEs, an environment that allowed misconduct to flourish… the public must know what is going on to rebuild trust in these institutions and specific measures are recommended to ensure transparency is the standard going forward,” said Weylandt while presenting his paper.
According to Minister of Public Enterprises Leon Jooste, who was also interviewed for the IPPR paper, the dual governance model which has been used in Namibia since 2006 is generally accepted as one of the most ineffective models around.
“It quickly became obvious that the attempt to govern our public enterprises (PEs) in flawed governance models is one of the fundamental root causes for the failure of PEs. There is a global tendency to migrate towards centralised governance models. In our case, we have both commercial- and non-commercial PEs, which is why the hybrid model is required.
“Our priority commercial PEs will be governed within a centralised model, while our non-commercial PEs will still continue to be governed within a dual-governance model. This model will provide us with the required governance infrastructure to reform our PEs, while still leaving room for further evolution,” said Jooste in his Q&A with IPPR.
Jooste added he is “anxiously” awaiting the finalisation of the legal amendments to existing legislation that will allow the implementation of the new governance model. “We will finalise this within the next month and table it in Parliament as soon as business resumes in 2017.”
Weylandt also noted that the new hybrid governance system has the potential to improve the performance of SOEs, as its move towards centralised oversight and control follows the example set by well-performing countries and can lead to more efficient and consistent governance.
However, to ensure this potential is fulfilled, the IPPR suggests that government clarifies how many SOEs it owns, what its nature of involvement is and how these SOEs are classified under the new law.
“To make the new overall governance rules effective, the law should include clear penalties for non-compliance; the new law should clarify who is ultimately responsible for enforcing governance rules, keeping in mind that line ministries have performed poorly in the past; new governance measures should include common accounting standards, including international ones for large and important SOEs; placing ultimate oversight with Parliament should be considered, as this could enable more transparent governance; and the law should mandate transparent access to essential information about SOEs,” Weylandt recommended.
He continued that performance agreements, board remuneration guidelines, board requirements, appointments, criteria followed in decision making, aggregate employment statistics and financial statements should form a sound startpoint.
“This information should be easily accessible online and expanded over time,” Weylandt concluded.