MIXED FEELINGS OVER SOE PARTIAL LISTING

By Penda Jonas Hashoongo and Rosalia Davids
May 2016
Prime Business

THE partial listing of certain State Owned Enterprises (SOEs), a concept that was introduced by the Minister of Finance, Calle Schlettwein, in his budget speech earlier this year, has been met with great enthusiasm from industry and economic experts alike; with both lauding the positive impact such listing is likely to have on the operations of these institutions.

With the establishment of the Ministry of Public Enterprises, led by Leon Jooste, government indicated its intent to transform the operations and subsequently the profitability of State Owned Enterprises, which have garnered a reputation of inefficiency over the last two decades. In line with this intent, Schlettwein announced a few months ago that the government will be crafting proposals for the partial listing of some SOEs in line with the consolidation measures that the government, through its latest budget, is trying to enforce.

Despite initial scepticism about the proposed moved, local industry and economic experts appear to warming up to the concept of partial privatisation of local Public Enterprises.

Namibia Chamber of Commerce and Industry President, Sven Thieme, has emerged as one of the proponents for the partial listing of SOEs, indicating however, that the process would have to be preceded by proficient turnaround strategies of the perennially beleaguered institutions.
 
“Partial listing would only work once the SOE have been turned around.  For partial listing to be successful, it would require the right balance of two worlds.  This means that it would need to be governed by a charter which sees to it that National priorities are driven as per Government’s agenda, with no political interference, but rather based on performance delivery. Coupled to this would need to be market mechanisms of efficiencies, economies of scale and returns. These would have to be in place to attract non-government participation,” he said.

“No one will have the interest in buying shares in a loss-making operation. On the other hand, government could lose million as large assets may be bought under value, then turned around and then sold again, only filling the pockets of a few. Therefore, while partial listing certainly has its merits, it is more important to ensure that SOE have a clear business strategy aligned towards achieving national objectives, within the framework of good business practices corporate governance, and driven by strong leadership, accountability and transparency.  If there are in place, there is no reason why leakages and non-performance by SOE’s cannot be put to an end.  SOE’s play an important role in facilitating economic development – and we therefore need to do everything we can to get our SOE’s to support economic development,” Thieme told Prime Focus Magazine while explaining that the partial listing process would not prevent government from losing millions to these SOEs until such a time that the rehabilitation of their operations in achieved.

Meanwhile, former Nampower Managing Director, Leake Hangala, expressed less pessimism about the partial listing process, advocating for its implementation on the basis that it would bring with it operational reform that would finally enable government to get returns from these institutions.
“Partial listing can bring a number benefits. One of the benefits it can bring is capital to the shareholders, which in this case government would be one, that can be reused in the reinforcement other projects or to improve the country’s socio-economic standing,” he says, adding that Namibians will also be afforded the opportunity to take ownership of these institution through the purchase of shares.

“I am for the partial listing of the Public Enterprises because it brings about a different style of governance for both the board and the management as they will be comprised of individuals from both the private and public sectors. Often we find that the board members of State-Owned Enterprise come from similar background and have the same way of doing things. Therefore, bringing diversity into these boards will enhance and enrich these companies,” Hangala told Prime Focus Magazine.

Despite his overwhelming optimism regarding the proposed measure, Hangala concurred some of Thieme’s assertions, saying that although the concept of partial listing is a laudable one, it will only be realised if there is underlying value to be sought through dividends from these SOEs; a situation which creates a stringent criterion regarding which SOEs are able to be partially listed.

The proposal of the partial listing of SOEs comes at a time when a significant number of them have toiled to be accountable, with some of them failing to provide audited reports while others have failed to attain profitability since their inception.

 Labour Research expert, Herbert Jauch also tells Prime Focus Magazine that Government has been unsustainably bearing the brunt of subsidising parastatals. “When the government gives money to SOE’s they should make sure to evaluate how the money has been used and make sure they have met the target set by government. It is definitely not a good idea to partially list parastatals because privatising parastatals will mean that water and electricity would be expensive because private individuals sets their targets and prices differently,” he says.

He adds that, “average Namibians won’t be able to afford anything but the only option is for the government to make sure that SOE’s meet the requirements when giving money.”