Maihapa Ndjavera

WINDHOEK - Public enterprises minister Leon Jooste said the successful reform of parastatals is a non-negotiable element that has become critical to ensure that the current economic downturn is countered as soon as possible. 

Jooste made these remarks when he announced the activation of the Public Enterprises Governance Act this week. 

“I believe that economic recovery will be all but impossible without calculated but expedited public enterprise reforms to increase profitability, contain and maximise subsidies and to entirely cease bailouts as soon as practical,” said Jooste. 

He emphasised the ministry conducted research and benchmarking in identifying and migrating towards an appropriate governance or ownership model, which clearly illustrated that a centralised governance model is proving to be the most effective for public enterprises. He noted that there has been a global shift towards this model in recent years. He clarified that in a centralised governance model, the shareholder or ownership functions are centralised under one authority, ensuring the uniform governance of public enterprises. Jooste added Namibia was faced with a unique challenge of complicating an elegant solution to address the flawed governance model. 

“Other countries have only recognised commercial entities as State-Owned or Public Enterprises. We registered several non-commercial entities such as service providers, education institutions, regulators and more as public enterprises,” he stated. 

The minister further stated that having realised that non-commercial entities perform equally important functions, the ministry had to conceptualise a government solution that would cater to their needs, as well as for those of typical commercial entities. 

This, Jooste explained, is what led to the creation of the Hybrid Governance Model for Namibian parastatals as approved by cabinet in June 2016. The model defined three categories of public enterprises, namely commercial and non-commercial entities as well as financial institutions and extra-budgetary funds.

According to the public enterprises minister, one of the fundamental anomalies addressed in the design of the new governance architecture was to address the scenario where a potential conflict of interest existed in cases where some authorities, like ministries, had complete control over all policy formulation, regulatory functions and implementation within a certain sector. 

“This created fertile ground for possible unintended uncompetitive behaviour and might have influenced the slow liberalisation of certain sectors of the economy,” said Jooste. 

“In the Hybrid Governance Model, only the owner of the commercial public enterprises is centralised while the other two categories remain in a dual governance model where the Ministry of Public Enterprises will set corporate governance guidelines that they must adhere to while the typical functions associated with ownership will remain with the various line ministers.” 

The minister said he was confident this would result in improved corporate governance that will lead to higher efficiencies and performance.