By Josef Kefas Sheehama
The performance and quality of the services provided by SOEs are under intense pressure to improve. State-owned businesses in Namibia are dealing with a variety of problems, including corporate governance challenges, insufficient accounting systems, and insolvency. Some SOEs operate like family companies, controlling or taking part in management; in these instances, the family is the leadership of a particular well-connected group.
According to research, SOEs’ generally subpar operational and financial performance can be linked to problems with governance. The performance of SOEs will increase, and government assets will be better protected, with an efficient government shareholder management model that addresses the major governance concerns.
The Public Enterprises Governance Act, 2019, is intended to “provide for the effective governance of public enterprises and the monitoring of their performance, to provide for the restructuring of public enterprises, to provide for the powers and functions of the Minister of Public Enterprises, and to provide for incidental matters.” To improve service delivery and competitiveness, as well as the performance and corporate governance of SOEs, a key component of the Namibian economy, reforms are required. In the absence of reform, the magnitude of the public debt—at levels exceeding 60% of GDP and in the face of numerous macroeconomic shocks like the pandemic and the Ukraine War—is simply too great to justify delaying taking any significant action. Given the proper context and cooperation with other stakeholders, SOEs continue to be a crucial weapon in any government’s arsenal for creating societal and public value. In addition to being transparent and responsible through effective communication and reporting of aims, actions, relationships, and performance, SOEs can act as catalysts for the development of sustainable value for the general public. Sadly, SOEs only contributed a little amount of government revenue in recent years, but they required substantial budget support and present considerable fiscal concerns because their portfolios are not financially viable.
The government should develop appropriate government assistance policies to provide better financial performance to increase the impact of government support. Additionally, there needs to be clear communication between the government and SOEs, particularly when deciding the direction of government assistance policy. The impact of government support on SOE performance may be enhanced by efficient communication between the government and SOEs regarding the government’s goals. The government, as a shareholder, has not seen any appreciable financial gains. The majority of SOEs are currently in a state that is detrimental to the process of national development. In addition to being vital for Namibia’s transition from an economy that is unduly dependent on trade and investment to one that is more driven by domestic consumption, the SOE’s reform is also a test of the political will and capacity of the Namibian government to establish a market-based domestic economy. The government’s goal for sustaining domestic economic growth and increasing political control over all facets of the country includes reform of the SOEs at the centre. However, the state’s push for consolidation through mergers and acquisitions has received more attention in the most recent round of SOE reform than efforts to enhance corporate governance.
In addition, a handful of SOEs has survived despite worries about overcapacity and poor profitability. These organizations are now referred to as zombie businesses. The Namibian government must get rid of excess and out-of-date capacity and dispose of wasteful assets among SOEs to promote growth and ensure optimal resource allocation. This might take several different forms. Some SOEs might have their state capital reduced, allowing for a greater proportion of private ownership, while other SOEs might be modernized or reformed. The result will inevitably be a decrease in the total number of SOEs. Through public-private partnerships (PPP), I see the private sector playing a bigger role in several sectors. The private sector’s involvement under the mixed-ownership model will be more aggressive for profit-driven SOEs. In extreme circumstances, state funding may even be altogether eliminated, completely exposing these industries to private funding. Resources, savings, and capabilities from both the public and private sectors are being used inefficiently by SOEs. This has the opportunity cost of diverting resources from high-priority sectors that are crucial. The necessity to obtain cash to support failing SOEs has occasionally contributed to a larger macroeconomic crisis by distorting financial institutions and monetary policy.
The bottom truth is that practically every reform proposal on the authority’s agenda still has effective execution as its top priority. Particularly considering that vested interest groups are putting up a lot of resistance to SOE reforms. The authorities must move on with the SOE reforms in coordination with measures in addition to proving their resolve. Short-term structural unemployment will rise as a result of SOE’s transformation. If no steps are taken to promote opportunities and labour mobility, this could become a delicate issue. Privatization and liquidation are occurring at a time when parastatal reform is on many people’s minds. Enterprise reform and private-public partnership are four ways in which parastatals can be reformed. Due to the public perception that some SOEs are bureaucracies that are plagued by ineffectiveness, inefficiencies, corruption and incompetence as well as being a drain of public resources. It is worth pointing out that Article 40 of the Namibian constitution entrusts Cabinet with the duty of direction, coordination and supervision of parastatal enterprises and to review and advise both the President and the National Assembly on the rationale, desirability and wisdom of legislation, regulations or orders about such state enterprises considering the public interest. The trend in the restructuring process has been towards greater decision-making autonomy for boards and executive management.
Hence, the reforms should focus on the appropriate balance between commercial and non-commercial objectives linked to its purpose and mission, as well as between internal and external perspectives. The SOEs board should ensure that they possess the right level of competence, professionalism, authority, integrity and independence. The SOEs should be managed according to principles of transparency and accountability, with their performance reported on a timely, consistent and transparent basis.
In conclusion, successful SOE reform is critical to reduce vulnerabilities from rising indebtedness and foster a more efficient resource allocation. It should leave Namibia with a more dynamic set of SOEs that compete on a level playing field with the private sector and feature modern corporate governance with professional boards and management. Nonviable SOEs would be restructured or allowed to exit.
Therefore, the application of good governance and reforms in SOEs should be supported by a thorough understanding of the concept of leadership, a clear demarcation of the roles of key players in the SOE governance environment, measurable performance indicators established in a shareholder’s compact, holding the board and management accountable for the performance of the SOE and its conformance to its strategic mandate.
