Independent economist Robin Sherbourne said one of the possible reforms for Namwater is to maintain State ownership but to encourage private water desalination to boost bulk water supply.
“Namwater’s problem is that it may be inefficient as it does not face competition and is also prevented by government from charging prices that allow it to properly maintain its existing infrastructure and build a strong balance sheet, which would allow it to raise new capital for new infrastructure without help from government,” the economist said in the Namibia 2023 fourth quarter economic review.
Meanwhile, Namwater is moving forward with its own desalination project, although the Erongo Desalination Company has previously proven that private-sector operators can offer bulk water at competitive pricing.
Sherbourne, in the new publication, took issue with commercial public enterprises that place fiscal burden on the nation’s public finances by underperforming.
According to him, this has been a perennial concern since the 1990s when so many new State-owned companies were created.
Namibia currently has 81 public enterprises (PEs), consisting of commercial and non-commercial entities.
The total asset value of commercial PEs stands at N$120 billion, liabilities at N$60 billion and the net value assets at N$60 billion. The employment count stands at about 25 000.
“Over half of all commercial public enterprises are making losses in the last financial year. Economic principles have something important to say about commercial public enterprises and, as is so often the case, ignoring fundamental economic principles inevitably means running into trouble,” said Sherbourne.
He noted that public enterprises vary enormously in their economic characteristics and functions and there is, therefore, no one size fits all prescription for reform.
Secondly, he made it clear that politics and business are very different spheres and politicians and businesspeople respond to very different incentives.
“If politicians are put in charge of commercial undertakings, they are likely to pursue political rather than commercial objectives and the two are generally in conflict,” he advised.
Finally, Sherbourne added that as a result of these features, public enterprises are often politicised, are asked to pursue non-commercial strategies, cannot set economic prices (are not able to set prices that cover their costs), are overstaffed (they cannot reduce staffing), are undercapitalised (they cannot build their balance sheets), and suffer from underinvestment (as they cannot afford to invest).
These situations can be recognised in many of Namibia’s commercial public enterprises, he said.
Furthermore, public enterprises must not be used as instruments for financing or otherwise benefitting politically partisan activities. As such, PEs should refrain from making financial or any other contributions to political organisations, as this practice is strictly prohibited.
This stance is included in the draft policy document, dealing with the PE ownership policy, that was shared earlier this week. Over the years, State-owned enterprises (SOEs) have been questioned for their roles in corruption, nepotism, and mismanagement of public funds and abuse of power.
“Corruption and other irregular practices cause PEs to suffer financial loss, or brand and reputational damage, as well as distorting markets, eroding public trust and causing the degradation of domestic and foreign investor confidence,” the draft policy reads.
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