By Dr Asoka Seneviratne
My experience as Special Advisor with the Office of the President, the National Planning Commission (NPC) in Namibia for nearly six years exposed me to the details regarding the SOEs sector in Namibia. As a result, I feel I can contribute to the debate that hit the media over the last months, namely; whether to establish a Ministry of Public Enterprises or not.
In addition to working with the National Planning Commission, I had the opportunity to work at the State Owned Enterprise Governance Council (SOEGC) Secretariat where I had advised on a number of issues, including on the need to establish a monitoring and evaluation system i.e. in order to monitor performance trends as well as to track progress in terms of SOEs’ compliance to good governance and best practice as required by the SOE Act, Act 2 of 2006. As a result, I managed to have a bird’s eye view of the working of the public enterprise sector in the economy of Namibia.
It is expected that the welfare of people would be improved by creating employment and income-generating opportunities leading to the reduction of poverty and income inequality. In fact, PEs have huge multiplier effect due to the sectors in which they operate. Reasons for the establishment of about 87 public enterprises in Namibia should be seen in the above background which is similar to other developing countries. In other words, public enterprises can be assessed and evaluated on the basis of their contribution to economic growth and development in the context of Vision 2030.
However, the presence of public enterprises has been criticised due to various reasons. With respect to the provision of service by PEs, inefficient service delivery is a very popular topic in public discussions. The man on the street is not happy with the service delivery of PEs. Investment in PEs is a concern because such investment should generate sufficient return as all resources are limited and contain opportunity cost or there are other ways and means for investment to generate the expected returns. Low productivity of PEs is another serious concern which cannot be neglected. According to some quarters, perceived corruption and waste should be addressed and resolved. Increasing losses and bailouts are also a call for reforms as some PEs have become a huge burden on government finances. Generally, negative aspects of PEs are more dominant than the positive aspects of PEs.
In view of the above criticisms, there is a need to assess and evaluate each PE according to their mandates, visions and missions. Some PEs are established to provide essential services and therefore not aimed at generating profits. Some PEs are commercially oriented. As a result, they can make profits or ensure sufficient returns in their investment. Nature and extent of competition is another factor that needs to be taken into consideration when evaluating the performance of some PEs. Employment creation and income generation potentials and their contributions to reduction of poverty and income inequality are some other elements that need to be taken into account when assessing and evaluating PEs.
Serving the true purpose
I must state that, as there was a need, a wheel was invented. In the same vein, due to various reasons, PEs have been created or established. The real concern or the issue is how to use PEs to serve the purpose for which they have been established, by taking into account the criticisms levelled against PEs. It should be mentioned that the State-Owned Enterprises Act 2 of 2006 accommodates the essential oversight functions in order to ensure that PEs would perform by generating the expected results by contributing to economic growth and development. In other words, including the governance principles and good practices, and other essential tools in place to ensure that PEs function well. Furthermore, government is committed to allocating adequate resources required by PEs and to improving the service delivery of PEs.
Basically, the PEs sector needs a paradigm shift on the basis of organisation and management.
It should be noted that there is a huge difference between organisation and management. If we cannot organise properly we cannot manage properly to generate the expected results. Currently, the PEs sector is too large to be managed so as to generate the expected results. This situation forces us to think differently. There are about 87 PEs and they have been categorised as (a) Economic & Productive (b) Service Rendering and (c) Regulatory.
Furthermore, PEs are placed in different ministries. As an oversight body, PEs are generally looked after by the State Owned Enterprise Governing Council (SOEGC). At the same time, respective ministries have their interventions according to ministerial mandates and working together with the Ministry of Finance. The relationships among the SOEGC, ministries and MOF take different forms. In fact, to what extent the abovementioned triangle relationships would enhance economic growth and development objectives of PEs is a matter for concern. Concern in the case is to organise PEs in a systematic and constructive manner in order to generate the expected results of the development efforts.
One aspect of systematic and constructive manner is to organize PEs under one umbrella. This does not mean that all PEs should be organised under one entity or the formation of a new Ministry of Public Enterprises (MOPE). If we develop consensus and agree to establish a new MOPE, then we need to think carefully which PEs should come under the new MOPE. Generally, the oversight functions of SOEGC should be applicable to the proposed new MOPE and other PEs belong to respective ministries. In view of the above, organization of PEs is highly focused and centralised with a purpose. In fact, the abovementioned new organization vindicates a paradigm shift which is essential if the PEs sector is to be vibrant and dynamic along with the economic growth and development endeavours in the context of Vision 2030.
The above is, generally, the organizational aspect of PEs.
The next aspect is the management of PEs on the basis of the new organization. Management means to generate the expected outcomes by utilization of allocated or available resources systematically and constructively with accountability for results. The above should be a credible and transparent process. Currently, the main stakeholder (Ministry of Finance) allocates resources and the respective PEs utilize them. SOEGC acts as an oversight entity of PEs. In fact, the ultimate trust in and effectiveness of the oversight functions are dependent on the pro-activeness of the SOEGC Secretariat. Either SOEGC or its secretariat does not have power to act decisively with respect to PEs. As a result, expected results cannot be generated. This is at the centre of concern for the management of PEs. In view of the above, we need a mechanism in which an authority is entrusted to act with power and at the same time, the respective authority is accountable for the expected results as well.
Indeed, currently, there is a gap among (a) authority, (b) the generation of the expected results and (c) accountability for those results.
Costs and benefits
The establishment of the proposed MOPE may be questioned because of cost and benefits.
With respect to cost, the establishment of a new ministry needs additional resources that should be accommodated through the government budget. It may be possible that systematic and constructive organization would require only a marginal increase of resources. If the new move would not be involved with loss of employment, it should be acknowledged as well. On the other hand, if we continue with the current situation, overall cost may be escalated along with mounting criticisms. In view of the above, we need to think about benefits and ways and means of generating the expected benefits.
In this respect, the abovementioned organization and management structures should ensure that “business as usual” should be changed fundamentally, substantially and objectively. In other words, as we “change both wine and the bottle” at the same time, it should generate the expected results. As a result, benefits can be expected to generate from many sources. Improvement of efficiency and effectiveness can be expected and this will improve productivity. Indeed, improvement in productivity contains many welfare aspects. Enhancing service delivery can be expected.
Any form of corrupt practices and wastage can be reduced to a minimum if they cannot be eliminated. New management instruments such as Public-Private-Partnership (PPP) can be promoted through the new MOPE. In short, PPP is a very useful source to address and resolve many challenges involved with PEs. Accordingly, employment creation and new income generation activities can be expected paving the way for the welfare improvement of people.
Organization and management of PEs mean making a dynamic and accommodative environment for the growth and expansion of the private sector. As government provides a conducive environment through investment in infrastructure, private sector growth is accommodative. As a result, growth and expansion of the private sector can support economic growth and development by creating and sustaining employment, provision of more and more goods and services, and hence, improving the overall welfare of the people. The above points to the fact that, through the proposed (new) Ministry of PEs, the private sector’s role as an engine of economic growth can be enhanced.
There is however a need to ensure that establishment of MOPE should not be merely a change.
My verdict
While the change is undertaken for a fundamental purpose and objectively, the expected results should demonstrate that establishment of the proposed new ministry is a right decision taken at the right time. The above is dependent on the leadership of the new ministry. As the purpose and objective are to change the “business as usual” tendency and to generate the expected results, the new ministry and its management should be able to generate the expected results, and not provide excuses.
In this respect, the proposed ministry should have right people at the right time for the right jobs. This cannot be compromised at any cost. It is also important to stop another wave of criticisms that would be made against the new ministry. In this respect, the ministry should establish proper communication and reporting mechanisms to the public as well as to ensure that MOPE is in business entrusted to it by the public. Furthermore, as the Auditor General is expected to indicate the results based on the governance principles and good practices, it is impossible for the proposed (new) MOPE to act in any unethical and unexpected manner as it is committed to accountability by following the right or prescribed procedures.
It should then be concluded that, new organization and management of PEs is being proposed to address and resolve the mounting criticisms in view of the fact that the PEs sector in not contributing to the development endeavours in the country. In light of the above, the new move is a paradigm shift of which the expected benefits will be higher than cost. In this respect, it is essential that the new organization should work to accomplish its objectives in a systematic and constructive manner. As a result, the PEs sector will be able to contribute to economic growth and development in the context of Vision 2030.
• Dr Asoka Seneviratne is the Director: Programmes & Institutional Development at the International University of Management (IUM). Opinions expressed in this article are of the author. Therefore, it does not reflect the International University of Management.