- … to be profitable
The issue of loss-making State-Owned Enterprises (SOEs) can become a thing of the past if these institutions undergo significant structural governance changes such as the institution’s CEO and some board and management executives appointed on merit, through a transparent process, and not directly by the President.
“The fact that the President appoints the heads of these institutions leaves very little room for objectivity and barely any incentive to perform. I do not think it is right, and it is a reason for the bad governance which is responsible for the hapless performance of these institutions,” he said in an exclusive interview with the B&FT to mark his 80th birthday celebration.
To the revered business leader, most of the individuals appointed by the President to head these institutions become loyal to the appointing authority and not necessarily to the organisation they are meant to lead.
“People go in there without commitment and loyalty to the company. How, then, can we expect these companies to deliver value? We need to get the governance right. The people at the helm of affairs of these enterprises have been entrusted with assets that belong to all Ghanaians, and they should be accountable.
“When I look at the assets that some of these institutions sit on and are running at a loss, I know they will not survive in the private sector. They would either be sold off or restructured. How can you say you have GH¢20billion in assets and say you have lost money, not once or twice, but every year?” he queried.
The latest report from the State Interests and Governance Authority (SIGA) shows that some 47 State-Owned Enterprises (SOEs) recorded a cumulative loss of GH¢2.61billion in 2020. Yet, this was a marked 49.2 percent improvement on the 2019 aggregate net loss of GH¢5.16billion.
Apart from the losses recorded, government’s exposure in total sums commitments to SOEs amounted to about GH¢21.53billion as at the end of 2020, according to the report titled: ‘2020 State Ownership Report’.
The exposure includes government subvention of GH¢1.48billion, on-lent loans of GH¢14.74billion, and outstanding stock of government-backed guarantees of GH¢2.38billion. This is in addition to contingent liabilities of GH¢138.99million from ongoing Public-Private Partnership (PPP) projects.
The remaining component of GH¢2.79billion was in government support and bail-outs to some State Entities (SEs) to mitigate the adverse impact of COVID-19 at the height of the pandemic.
Many governance experts and civil society organisations have proffered several solutions to the challenge; but Dr. Yamson, who currently sits as Board Chair for several blue-chip companies in Ghana and beyond, believes that the root cause of the problem lies in the current governance structure of these institutions and once that is taken care off, a lot will change.
He noted that experience from elsewhere shows that SOEs can be reformed for the better of society, and Ghana should not be afraid of learning from best case scenarios to reform these institutions that truly hold the key to transforming the economy.
“SOEs were a fancy socialist idea. Look at what Margaret Thatcher, former British Prime Minister, did during her tenure; she faced hell for her decision to rationalise the SOEs but if she had not done what she did, the economy of Britain would have collapsed.
“Those who speak the most vehemently against divestiture, do so not because some went wrong, and I admit some did, but mainly because of personal interest. I believe we should privatise these institutions, and we must do it right. Transparency is key. We should diversify the ownership of SOEs and limit what each person can buy. Look at what happened in Europe and the United States of America (USA), the banks that nearly collapsed and were taken over by the state have all been returned to private hands,” he added.
To him, the private sector would not take these assets for free, but rather pay real money; and when that happens, the government will get money, not suffer losses or get the pressure to go and borrow.
“We should hold these enterprises to the same standards as private firms – if they are being run properly, delivering value as it would as a private firm, then leave it. But if we hear they are paying GH¢1million as dividends to government, we must ask how much in assets that company is overseeing and compare it to a private company.”
