RCC goes under knife

A cabinet committee has decided to throw the beleaguered parastatal a lifeline by putting its operations under curatorship of the High Court.

08 September 2017 | Government

The next parliamentary session which opens on Tuesday will be asked to deliberate on a decision by the Cabinet Committee on Overall Policy and Priorities (CCOPP) to file an application with the High Court that beleaguered Roads Construction Company (RCC) be placed under judicial management. The CCOPP took this decision after many hundreds of hours of discussions and head-butting on the RCC's critical financial status, which the minister of public enterprises, Leon Jooste, yesterday described as the most precarious among all SOEs. This is in all likelihood the first time that a parastatal is being placed in this situation and Jooste stressed that the CCOPP decision was – in the end – a collective one. “We are convinced that as we looked at all the options for the RCC, our collective decision is that this is the preferred option for the RCC,” Jooste said. The entire judicial management process is captured under the Insolvency Act and the Companies Act, which stipulates in which conditions judicial management can be applied. Jooste said the RCC has many creditors who will have to wait and see their claims against the company settled while the company is under judicial management.

This means that once parliament endorses the CCOPP decision and the High Court grants the judicial management process, the court will employ a judicial manager who will for the period of the process serve on a permanent basis as a “replacement CEO”.

During that time, neither the shareholder (the government) nor the board will be “disempowered” and will have no influence or powers over the parastatal.

“If the board were to decide to oppose this decision, the shareholder will have no other choice but to dissolve it and replace it with an interim one,” Jooste said.

He said that the current, and former board since 2015, have been part of the entire process and that have been granted ample opportunity to share its views and insights.

The current board chaired by Fritz Jacobs was informed yesterday morning, a day after the CCOPP had reached its decision.

“We think this is in the best interest of all stakeholders that this process is not delayed. We have spent enough time deliberating on this and hope it will happen as soon as possible,” Jooste said.

“We are not concerned by the process considering that the initial proposal was to liquidate the RCC. The wisdom of CCOPP is to ensure that the RCC continues,” said Jacobs yesterday afternoon.

It is expected from attorney-general Sacky Shanghala to have the submission to parliament ready by next week.

Should parliament endorse the decision and the High Court determines to place the parastatal under judicial management, the company will continue to operate.

During the period, however long or short it may take, all current 393 RCC employees will be paid their basic salaries from the treasury, which translates into N$7 million per month from the treasury. This, however, does not include any bonuses or other extra benefits, Jooste said.

All other costs related to the judicial management process will be borne by the RCC.

One of the first things the judicial manager will have to do is to pro-actively seek ways to restructure the debt of the company and to respond to financial and legal demands on the company.

Jooste stressed that the outcome of the process cannot be pre-empted.

The judicial manager can at the end of the process recommend that the company be wound up or that there is a chance to salvage it. In the end the shareholder will have to decide the fate of the company.

Hybrid governance model

Jooste said his ministry was also planning to fix other public enterprises that are under financial constraints, firstly by implementing the proposed hybrid governance model.

“We have a complete strategy on transforming commercial public enterprises. It is a multi-pronged strategy dealing with all issues. We have done a lot of benchmarking with other countries that have been very successful at transforming their SOEs.

“It is very long and complicated process. We will try to leapfrog certain processes and expedite that to generate positive results as soon as possible. The reality is that these things take time. We need a mind-shift, a culture change in these enterprises,” Jooste said.

The move to the hybrid governance model will mean that all 16 000 employees at SOEs will have to be led through change, Jooste said.

“We will not entertain too many excuses. We are convinced that in most cases commercial public enterprises are more than financially viable. Some of them occupy monopolies. Of course, some of them have important strategic roles to play and we should not put too much emphasis on profits in all cases.”

Jooste said the RCC is a case in point of some of the SOEs that can be “cash cows” for the government:

“The RCC should be able to generate profits because what we see in the private sector operating in that industry generates profits for their shareholders. Why has our own entity operating in the same sector, which is enjoying some preference, not been generating the same levels of profits? We will not be happy to hear enterprises reach break-even points and are not financial burdens on the shareholder any more. We will be demanding dividends.”


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