By Kingsley Webora TANKEH
The president’s advisor on the economy, Seth Terkper, has urged state institutions – especially state-owned enterprises (SOEs) and their adjoining ministries – to align their strategic plans with objectives of the national development plan.
Speaking at a high-level meeting on performance contracts organised by the State Interests and Governance Authority in Accra (SIGA), the former finance minister noted: “You cannot do an effective evaluation if you don’t have a planning framework,” – hence the need for state institutions, including SOEs, to align their objectives with the National Development Plan.
He stressed that every public sector institution must tap into the National Development Plan.
The meeting gathered officials from various public institutions, who were taken through the modalities of performance contracts and implications of non-compliance therein.
Strategic plans from ministries and government institutions guide the medium-term expenditure framework by the Ministry of Finance, which can then facilitate performance-based budgeting.
However, some of these entities’ strategic plans – having been made to last one administration – have lapsed or are in their expiration year.
Established in 2019, SIGA has oversight over 175 specified entities – state-owned enterprises (SOEs), joint venture companies and other state regulatory and service providing institutions and agencies – and is required by law to sign performance contracts with these entities to evaluate their performance regularly to protect government interest.
A performance contract is a type of agreement whereby payment or other benefits are contingent on achieving specific, measurable outcomes or performance standards. It is essentially a contract that focuses on results, using performance metrics – Key Performance Indicators (KPIs) – to determine compensation or other aspects of the agreement.
In this case, a performance contract between SIGA and the individual entities would help regulate spending, improve efficiency and productivity and the financial position of these entities to ensure profitability and dividend payments to government in the case of SOEs.
At the meeting, Director-General of SIGA, Prof. Michael Kpessa-White, noted that performance contracts are necessary to ensure that state-owned enterprises do not make losses by engaging in reckless expenditures.
“If entities operate without performance contracts, the possibility that they will not have clear goals and the temptation to spend as though there is no tomorrow is very high,” he observed.
He enumerated the benefits of signing performance contracts, saying: “It allows them to benchmark their performance and have key performance indicators to comply regularly with statutory obligations and submission of reports to SIGA”.
“We expect a certain level of high performance from our entities,” he said, stressing that non-compliance with the performance contracts will be met with sanctions including removal of the CEO, a board member or the entire board and naming those deemed responsible.
Prof. Kpessa-White noted that newly appointed CEOs may not be abreast with SIGA’s clear mandate and what is required of them, hence the need for more engagement.
This comes on the back of President John Mahama’s directive to Chief Executive Officers of state-owned enterprises (SOEs) to submit their audited and management accounts to SIGA by April 30.
According to Prof. Kpessa-White, about 145 of the entities complied with the directive.
“A large majority of them, about 140-150, did comply. We submitted the compliance report to the presidency by its 14th of May deadline,” he added.
However, he said late appointments to the boards of some entities delayed their submission – but acknowledged that some entities submitted well after the deadline when the boards had been constituted and approved the audited accounts.
As a regulator for over 175 specified entities – of which several are debt laden and struggling to manage their debt Prof. Kpessa-White believes that performance contracts will help mitigate and manage their debt.
“We will begin to see many entities keeping within the limits – and when that continues for a long time, we will reduce the debts incurred by state-owned enterprises,” he said.
SOEs are allowed to borrow against their own books, that is to seek financing opportunities against their assets. However, their borrowing is limited and must adhere to the State Interests and Governance Authority Act, 2019 (Act 990).
The regulator therefore urged SOE managers to be prudent and follow due process when they decide to borrow.
“If you intend to go and borrow on your own books, make sure you run your proposals through SIGA for an analysis based on the overall financial performance and financial standing and business plan or your strategic objectives,” he advised, cautioning against reckless borrowing that could balloon the national debt stock.
