Mass SOE reforms loom
A proposition has been made for some public enterprises to surrender their facilities to the private sector.
16 February 2021 | Local News
At least six parastatals are up for immediate reforms that could see some of them abdicating their functions and property base to the private sector, Namibian Sun can reveal.
It is understood that the public enterprises ministry contracted local consultant Rainer Ritter last year to explore possible reforms at entities such as Telecom Namibia, the Namibian Ports Authority (Namport), Namibia Wildlife Resorts (NWR), Namibia Institute of Pathology (NIP), TransNamib and Meatco.
The reform proposal documents, seen by this publication, propose an avalanche of changes in the operations of the entities, in some cases even suggesting that entities such as NWR give up some of their facilities into the hands of the private sector.
Public enterprises minister Leon Jooste yesterday said ministers have been instructed by the Cabinet Committee on Treasury (CCT) to prepare an implementation plan in line with recommendations from the High-Level Panel on the Economy (HLPNE).
“The HLPNE report was approved by Cabinet and the implementation of various initiatives was referred to CCT. We will present our formal plan and recommendations to Cabinet via CCT, but this is all still work in progress and will only be implemented once approved the Cabinet,” he said.
He added: “We don’t have any formal plan yet and have also not decided on final detailed recommendations for individual public enterprises. Once approved by Cabinet, these will be shared with the public.”
Jooste said his ministry often receives proposals on potential public enterprise reforms from various people and organisations.
He did not comment on how the ministry is treating Ritter’s reform proposals.
Meanwhile, Ritter refused to comment, citing client confidentiality.
Namibian Sun perused the reform proposal documents to see what the major recommendations are.
NWR has a history of non-profitability. Its first profit was achieved in 2019 when turnover increased by 9.1%. The average increase in turnover for the past five years was 8.8%, above the industry average.
The audit opinion of the 2018/19 annual report was a disclaimer. NWR is audited on the basis of a going concern accounting, thus the auditors were of the opinion that the current liabilities exceed the current assets and, therefore, the future of NWR is at risk to fund its obligations.
It is recommended that government provides shareholder funds of N$250 million.
It also suggested that Hardap, Gross Barmen and Duwisib Castle facilities are offered “individually for joint ventures to the private sector”.
“One should consider offering Duwisib Castle to Gondwana directly, since they have a good track record and understand marketing historical sites much better than NWR. Shark Island Resort can be offered to a local operator in Lüderitz,” the report read.
The audit found that Telecom is not a dynamic company and their current business model does not provide strong revenue growth.
“Telecom is paralysed due to its outdated business model, stagnation in revenue, the necessity to clean up its balance sheet by reducing debt and thus the inability to invest in new technologies to remain competitive.”
It recommended that the balance sheet be improved to make Telecom attractive for investors by reducing the gearing and improving liquidity.
“Technological change will be the profit drivers of the future telecommunications industry. If it is the intention of government to find a joint venture partner and do an initial public offering on the stock exchange, it will be important to ‘dolly up the bride’,” the document stated.
With outside assistance, a clear business model must be developed with the help of benchmarking.
NIP’s focus for the next 12 months, according to the document, should be to support a comprehensive improvement in the operating model to reduce operational costs and improve quality.
“After 18 months, the newly developed business model of NIP must be reviewed by government and if the operational costs have not been reduced and the milestones of the new business model not been reached, government should open the services provided for tender and competition from the private sector to reduce the costs of the ministry of health. Competition will force NIP to improve.”
NIP’s biggest client is currently the health ministry, with 96% of the pathology entity’s income generated from there.
The HLPNE recommended in its final report that NIP should be one of the entities considered for a partnership or joint venture.
It is recommended that a probe should be conducted to investigate the supply chain and the findings of the report must be provided to the public enterprises and transport ministries.
It was also suggested that a copy of the agreement between TransNamib and Tradeport is provided, if there exists one.
The tariff charged by TransNamib, the revenue generated, the costs and the profit/ (loss) generated must be investigated.
Namport’s most important income stream is revenue generated from the handling of containers, but with falling vessel visit numbers, there are fears that the financial impact could be severe.
It is recommended that staff size is reduced by 150 people. There are also calls for the company to employ a suitable CEO as well as a new board made up of experts and not a lawyer as ‘chairman’.
Further, Namport should provide the ministry with an analysis of competing harbour tariffs in the region so that Walvis Bay and Lüderitz can position themselves better.
It is recommended that a meat industry committee be appointed to bring the industry on a sustainable basis again and all stakeholders should look after the national interests, with the objective to have a private sector-driven meat industry.
Meatco should not receive any additional funding from government - this to force them to take unpopular decisions.
The future shareholding of Meatco must be resolved to create trust between the producers and Meatco.
The operations north of the veterinary cordon fence should be managed by a different organisation so that Meatco can be focused, competitive, profitable and export-driven.
Meanwhile, the Meatco abattoir should go through a benchmarking to establish its shortcomings. This must be done by consultants preferably from South Africa or Australia.