The monopoly of SOEs: Costing Africa a place in the 21st century

11 October 2016 | Columns

State-owned Enterprises (SOEs) are entities owned and controlled by governments to generate income into its coffers by competing with private enterprises (if there are any) through the provision of specific services to the citizens. These services may vary from electricity provision to water service provision to airline transport. Since the first group of African states got independent in the second half of the 1950s, SOEs have been used by most African states as one of the key sources of revenue. However, the relationship of governments and SOEs has made it very difficult for private entities to penetrate the market, even if the state entities continue to produce awful performances.

The aviation industry is one such example where monopolistic practices have for long taken their toll on the African continent. The range of these aviation industry operators in Africa varies from Ethiopian Airways to Kenyan Airways to our very own Air Namibia. These airlines provide local as well as international routes for passengers travelling within or outside their countries. However, it has for long surfaced that the services they offer to passengers remain of great concern. These aviation industry public enterprises have the power to influence governments into blocking any competitor that may wish to challenge their monopoly, more especially on local routes. Moreover, as long as travel is bogged down by service provision inefficiencies, many African airlines cannot claim their place as major drivers of global commerce. The impetus for development is clear and the demands of customers are forever increasing, making the need for change unavoidable.

A good example of SOEs'' influence is Air Namibia''s theatrics of using governmental influence to block Fly Africa from operating in the Namibian airspace. Fly Africa came up with cheap prices on local and international routes which would have reduced the customer base and revenue generation of Air Namibia. But Air Namibia was able to swiftly move in and get court orders that blocked Fly Africa from getting a permit to operate.

Perhaps the most damaging examples of these SOE monopolies in Africa are electricity provision corporations. From the Electricity Company of Ghana (ECG) to South Africa''s Escom to the Kenya Electrify Transmission Company, citizens of these countries have longed for the bailing out of the monopolies. This is because the companies do not efficiently provide the required services to the people. The inefficiencies of these SOEs are primarily the result of the past years of muddled policies and strategies, combined with poor leadership.

Besides the poor provision of services, there are many other reasons why African countries should open the doors for the operation of private entities in order that they (SOEs) can try to match the competition coming from their opponents. This poor service provision of SOEs range from the fact that that bribery and corruption is more rampant in SOEs than in the private sector. Studies have shown that the majority of workers in SOEs are corrupt. For instance, workers tend to take bribes before they do jobs that they are being paid to do. Most managers of these enterprises also embezzle money and others misappropriate them, leading to the slow growth of most SOEs.

A negative work attitude by workers is another problem associated with SOEs in Africa. Many workers regard these companies as something which does not belong to them so they handle it with negative work attitudes such as laziness and dishonesty. Since it is not their business they do not care what happens to it. This negative work attitude that is seen in SOEs is one of the major reasons many of these enterprises don''t do well.

Political interference from those in power also hamper the usefulness of public enterprises. Instead of getting qualified individuals to run these entities, most African political office bearers use people who are close to them or those who are faithful to their parties to operate public enterprises. Top executives are appointed to high portfolios not because of their qualifications or experience but due to their loyalty to the party in government. This in turn leads to poor performance as those who have been given the mandate to run the entities have little or no knowledge whatsoever in running such corporations. Furthermore, most SOEs also centralise their power. They are reluctant in delegating authority to all parts of the country leading to centralisation and subsequent inefficiency in the provision of services to the people.

All in all, there are many countries around the developed world that do efficiently manage their SOEs. African countries can learn from them. Though there are risks the continent may face, Africa may incur hidden costs by adopting models unsuited to our inflexible labour and policy constraints. We must admit and recognise both the historical and the more recent failure to manage these entities which are SOEs, we can start by changing our stubborn African mindsets of refusing to accept change. If we are going to embrace change we must be determined to change regardless of what may try to block us from attaining that much desired change. This is because we cannot have SOEs undermining our economic development as is presently the case in many African countries across the continent.

*Joseph Kalimbwe is fourth-year student studying towards a Bachelor of Public Management at the University of Namibia.

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