Public entities lack competition, World Bank finds

The World Bank has expressed concern at the scale of economic freedom some public entities enjoy, arguing that this could lead to poor service delivery if not addressed.

The bank raised these concerns in a recent country-specific diagnostic on Namibia.

It noted the lack of competition big firms providing bulk services such as NamWater and tourism operator Namibia Wildlife Resorts (NWR) enjoy, saying this limits the future growth of privately-owned companies.

“NWR is the only tourism operator in Namibia that may operate inside national parks. Community-managed conservancies have been granted some park access rights, but not the right to set up tourism lodge facilities inside the parks,” the World Bank said.

It noted that private firms are dependent on these government-owned monopolies for key inputs and support services such as port operations, aviation and bulk rail transport services, electricity, water and telecommunications.

“Without competition, state-owned enterprises [SOEs] are unlikely to deliver these inputs and services efficiently, which undermines core government objectives such as improving competitiveness, economic diversification, growth and provision of affordable, reliable, and accessible basic services,” it said.

Playing field unequal

The World Bank also questioned the environment in which private firms and public entities operate, and said the playing field is unequal.

“SOEs and the private sector operate on an uneven playing field because they are not held to the same standards of accountability and compliance to the law.

“As of June 2020, several public enterprises were not in compliance with the provisions of the Public Enterprises Governance Act and Companies Act,” it said.

According to the institution, a private company seeking financial support or banking services from a commercial bank must furnish audited annual financial statements, but public enterprises do not publish such statements, and in some instances still enjoy banking services and facilities despite this failure to comply with the Companies Act.

“SOEs are also not held to the same requirements for value-added tax, corporate tax or payroll-related obligations such as Pay-As-You-Earn [PAYE], pension fund contributions and employees’ benefit premiums. Non-compliance can often make public enterprises appear more competitive than they are,” it said.

Regulatory disconnect

Meanwhile, the lack of regulatory and operating oversight was also highlighted as a key concern for private firms hoping to compete with public entities.

According to international best practices, an SOE that is active in a sector of the economy should not have a simultaneous regulatory function for that sector.

“Yet, legislation assigns both regulatory and operational roles for several key SOEs. For example, the National Petroleum Corporation of Namibia [Namcor] was appointed as an advisor to the ministry of mines and has been assisting in regulating the upstream petroleum sector,” the World Bank said.

“At the same time, Namcor is also involved in upstream exploration licencing and is an active shareholder in a new oil exploration project led by Canadian company Reconnaissance Energy. This creates a conflict of interest,” it said.