Is semi-privatisation the way to go for SADC state owned enterprises?

Jun 26, 2017

By Southern Times Writer

WINDHOEK – Since the dawn of independence most Southern African Development Community (SADC) member countries saw the worse and worst in most State Owned Enterprises (SOEs) which are expected to be the cornerstone of economic development and revenue collection.

Just as the issue of none performing key parastatals across the region is as old as stone got in SADC, the problem is certainly not a preserve of one country but many others are failing to tame the beast of poor management, perennial loss making and sometimes poor corporate governance in these institutions.

While South Africa has had serious problems with the South African Broadcasting Corporation, TransNet, and South African Airways, Namibia has struggle to deal with the Air Namibia, TransNamib, Road Contractor Company and Namibia Airports Company while Zimbabwe has seen parastatals that once used to thrive including National Railways of Zimbabwe, Air Zimbabwe, Zimbabwe Power Corporation, Zimbabwe Broadcasting Corporation and NetOne facing perennial operational and financial challenges.

Perhaps the peculiarity of the Zimbabwean scenario has been the liquidity crunch that has gripped that country for some time which was also worsened by the economic sanctions to that country. However a closer look also shows that some of the struggling parastatals in Zimbabwe have had their fair share of mismanagement and unsound financial decisions by management.

As a remedy Namibia and South Africa deliberately created ministries that directly manage state owned enterprises and the belief has been that that move will lay a new foundation of profitability, efficiency and sound management for their parastatals.

In addition a few anecdotes have been proposed to deal with none performing parastatals especially in Namibia where the Minister of Finance Calle Schlettwein does not see a future in bailing out parastatals with public funds. In his own words, “that money is better used somewhere for the development of the country.”

His argument is backed by the reality that the Namibian Government has spent in excess of R$1 billion in the past few years through financial bailouts to state owned enterprises of different sizes and nature.

Counter listing and semi privatisation

Although in the most recent past the Namibian Minister of Public Enterprise, Leon Jooste has come short of suggesting semi privatisation his proposition through the Jooste Hybrid Model is to have most of the commercial parastatals listing on the stock market.

The Jooste Hybrid Model is a cabinet resolution adopted to have all commercial parastatals under one roof with the minister appointing board members with requisite qualifications and experience and also cantered on transparency, profitability and efficiency of parastatals in Namibia.

According to Jooste this will allow the parastatals to raise revenue for their operations and also adopt a culture of transparency, good corporate governance and eventually profitability as they will be bound to operate in the best interest of the roles of the stock markets.

Although listing of parastatals has been reported to be dragged back by political will or the lack of it, Jooste has belief the proposition is best suited for improvement in the SOE sector which employs tens of thousands in Namibia and contributes significantly to the country’s Gross Domestic Product.

Another key stumbling block to the listing and semi privatisation of public enterprises in Namibia and perhaps the region as a whole has been the need to strike a delicate balance on making profit on one side and rendering affordable services to the citizenry on the other. Alarm bells have already been raised over NamPower’s tariff charges which are already one of the highest in the region making electricity beyond the reach of many Namibians.

Just like in any country semi privatisation of parastatals is a hotly contested issue between the politicians and the technocrats so much so that either part argues its ways on paper and rarely translates it into action. The technocrats believe it is the best way while the politicians simply believe semi privatisation or privatisation will make it difficult for the majority poor populations to access services that are essential including provision of water, sanitation, electricity and medical services at some point.

Perhaps such scenarios of parastatals operating at cost reflectivity and managing outcry over exorbitant services has been the herculean task faced by Namibia in their quest to rein in on none performing parastatals.

Even though there is a glamour of hope in semi privatisation in Namibia proponents of the theory are reluctant to move forward as the move could easily make certain basic services a preserve of a few affluent nobilities. Some analysts in Namibia also argue that the major parastatals in the country are already on the stock exchange through various bond listings.

The Zimbabwe experience

In Zimbabwe’s case, reports by the country’s biggest weekly newspaper the Sunday Mail suggest that  Government has listed about ten parastatals that are essential to the economy and need urgent restructuring in line with the aim of making profit, improving service delivery, creating a new chapter of transparency and improving corporate Governance.

That country has somewhat made strides after unbundling the Zimbabwe Electricity Supply Authority into different entities with key focuses on certain services. While the move is still to pay homage, the power utility does not struggle much with rendering the service but has glitches in creating a sufficient revenue base and cutting dependence on borrowing beyond its income streams.

Perhaps the most troublesome parastatal in Zimbabwe has been the Zimbabwe Broadcasting Corporation whose challenges have been a mixture of poor management and a diminishing revenue streams. The Zimbabwean public broadcaster faced challenges of high salaries by management three years ago a move that left the operations of the company facing serious challenges. While privatisation or part of it has never been part of it the Minister of Information and Broadcasting Services Christopher Mushowe has made great strides in stabilising the company through continuous monitoring and appointment of new management.

Slim hopes in South Africa

Although it never rains but pours for SABC and South African Airways when it comes to profitability and corporate governance, Transnet a semi privatised railway company in South Africa seems to be getting the grips of balancing efficient service and driving a robust operation that is beneficial to that country’s overall economy.

Since unbundling its operations years back Transnet is now a shadow of its former self. Though the company still faces problems its efficiency has greatly improved under a holding company with sound management.

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June 2017
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