Leon Jooste takes the SoE bull by the horns

By Honorine Kaze
September 2015
Prime Business

Minister of Public Enterprises, Leon Jooste, will set the tone for turning around 89 state owned enterprises. He is ready to throw caution to the wind and believes it will not be an easy task to bring sanity to the country’s troubled State Owned Enterprises.

Most of the State Owned Enterprises (SoEs), categorized into commercial and non-commercial entities, have had a long history of poor performance and seeking financial bailouts from the treasury to sustain their ailing fortunes.

The non-commercial entities include regulatory bodies such as Communications Regulatory Authority of Namibia (CRAN), Namibia Financial Institutions Supervisory Authority (Namfisa) and the Namibia Institute for Pathology (NIP). The commercial ones are the business and profitorientated such as TransNamib Holdings Ltd, Air Namibia, and Namibia Port Authority (Namport) amongst others.

Speaking to Prime focus Magazine, Minister Jooste noted that at this initial phase of the Ministry, the setting up of the Ministry from scratch and extensive research are the main focus.

“The appointment of the local experts means that the research could be done in a shorter period and the findings could be implemented as the research advances, as opposed to the initial idea of using consultants who would have to wait for the research to be done in twelve months before adopting the recommendations afterwards. But with the new approach, activities will be done quicker and the Ministry could be functional earlier than expected,” he says.

He added that the research undertaken will help respond to the various issues found within public enterprises.

“We have heard of so many preconceived ideas about the reasons why most of those public enterprises are not succeeding as expected in their endeavours, however we would like to get those reasons from proper research that will also guide and give us recommendations on how to increase efficiency of the enterprises in questions,” Jooste says.

He feels improving the operations of commercial SoEs is a priority. Jooste says, “In the 89 public enterprises, 74% are non-commercial with the remaining being commercial ones. Our reform and change is mostly targeting the latter ones as they are costing the government a lot of money. They should at some instances be able to generate profit to reinvent themselves on and the most important is to also be able to provide a good service.”

However, he stresses on the fact that the commercial enterprises are not in any way expected to generate profits meant to be declared as dividends to the government. “People normally assume that the commercial ones should declare dividends to the government. However, they do not realize that if it was going to be the case then the enterprises might need to act as private entities, setting up their prices at their convenience.” He continues, “Let us take the example of Namwater if it was to generate profit, they would then increase their pricing to match their needs which would become very expensive for the citizens. That is why they are publicly owned by the government as we have to make sure they act in the best interest of the public, because if they were to be privatized, it might become politically and socially sensitive.” In the aim to increase efficiency of the commercial entities, the minister notes that although unfortunate, it is a sad reality that most of the companies will need to be capitalized on. “We will have to get expertise on how to develop the business plans that could get the company to grow organically. Most companies were not initially created to be capitalized on. In some cases we will need to invest and turn them around properly. We will definitely need to invest a lot of money in companies, such as Transnamib, which are in a difficult position.” For that to be successful, he notes that certain things will need to be done differently such as the format of strategic plans presented by the enterprises. “What we often see is the enterprises often come for money accompanied with a five year plan, yet they should write a strategy covering a longer period than just five years as we want to be convinced it is a sustainable one. I always advise that they should learn to plan properly and ask for more money instead of asking for less, and twothree years down the line money runs out, and they come asking for more funds which creates a bad impression. The best is to get it right the first time. We will make sure to offer them the right support through our expertise and funds but they should also make sure they do not keep coming back and are accountable,” he points out. Another challenge that needs redressing is the corporate governance, which the Minister says needs to be realigned with government strategies.

“There is very poor quality corporate governance in those entities. We will draw guidelines directing companies how they should Act to respectfully align with government and Namibian Development Plan (NDPs) goals. These entities play an enormous role in the country’s development, so it is important that they adopt proper corporate governance.”

He says that other points that need to be focused on during the research are to figure out the relevancy of certain public enterprises, the possibility of mergers or even possibilities of killing irrelevant ones at this point.”This are instances where we have companies that are no longer prevalent, for example Namibia Housing Enterprise (NHE), which is slowly being overhauled by mass housing and the current mass land. Or when companies perform similar duties such as Roads Authority and Roads Contractor Company Limited.”

“We will have to ask a lot of critical questions, look into recommendations and make difficult decisions, we will have to check if all public enterprises are relevant; some of those enterprises were set up in the former government and were carried on over the years without stopping and checking if they were still relevant in their current format. There might be need of rebranding and reinventing the companies to make sure they respond to current needs and are capacitated to respond to it.”

Another critical issue to investigate is the use of the dual governance model which implies that responsibilities are shared within two ministries. This relates to enterprises, such as Air Namibia and Transnamib Limited, which are under the Ministry of Works and Transport and will consequently also be under the Public Enterprise’s Ministry.

“The fact is the dual model has not been successful anywhere in the world. Since 2006, in Namibia, we had to sit on enterprise governance council which performed duties that will be performed by this new ministry thus performing as a dual governance model, and it has not worked fruitfully for the past nine years especially with the commercial enterprises. In my opinion we would need to migrate into a single governance model for success. However, we will let the research findings guide us into the right direction.”

Notorious for public enterprises often being led by acting Chief Executive Officers (CEOs) for years, the Minister intends on making sure that this trend is a thing of the past by crafting legislation that will direct enterprises into the succession implementation.

Despite all the questions in waiting of an answer, the new Minister, who was skeptical at first at the announcement of the Ministry, notes thats its setup is just a step forward, and not a full solution, for long-term success of the public enterprises.

“It is not just by opening the ministry that all issues will be solved, but through the resolutions and actions that will be done within the Ministry that we will witness change. The public enterprises are full of potential and are important for the growth of the ministry and we have to make sure they take the lead.”