PARASTATAL REFORMS: GOVT TO STOP RENAC SUBVENTION, SAVE MILLIONS

MANZINI – Taxpayers are set to benefit more from the parastatal reforms, as some of the entities will stop getting subventions from government.

Among those that will cease getting subventions is the Royal Eswatini National Airways Corporation (RENAC), which in the past six years has been offered a large chunk of the aviation budget. In these years, about E1.15 billion was set aside for RENAC, which a portion of it was eventually used to buy two airplanes in order to generate revenue for the entity. In 2017, it had been estimated that the Category A parastatal would be awarded a subvention of E16.4 million; however, it was eventually given E76.4 million.

Subvention

In 2018, the actual subvention was E355.7 million while in 2019, the subvention to the State-owned enterprise (SOE) was E322.56 million, while last year there was no allocation listed in the Kingdom of Eswatini Book of Estimates. On the other hand, the estimate for the 21/22 financial year is E222.56 million. For this financial year, the SOE was set to receive a subvention of E172.56 million, according to the Book of Estimates. The plan to end subventions to some parastatals was submitted to government by the Eswatini Economic Policy Analysis and Research Centre (ESEPARC), through a report on the merging of SOEs. The report details how the reforms of the SOEs would be carried out in a quest to relieve the taxpayer of almost E1 billion after the implementation. Currently, the 49 parastatals are offered subventions amounting to over E2.4 billion.

ESEPARC engaged in a study proposing how the merging and or reforms of parastatals could be carried out. In the study, nine recommendations were made and were subsequently adopted by Cabinet last year. These reforms would be implemented in a phase-in approach over a period not exceeding 18 months, it has been gathered. According to sources, ESEPARC in May 2022 submitted a work plan to government, through the Neal Rijkenberg-led Ministry of Finance, to utilise in the implementation of the reforms set to minimise the SOEs from 49 to at most 31.

Benchmarking

This publication has gathered from impeccable sources that the benchmarking exercise had assisted, as it was discovered that various regulatory and institutional frameworks for reforming SOEs had been adopted by countries around the world. These countries, it was said, had engaged in the reforms in order to stimulate competition, increase efficiency and improve the level of their performance. In a study by ESEPARC, it was said the parastatals should be developmental in their approach and contribute to the expansion of the economic base, socio-economic sustainability and enhanced government service delivery. It was said the major reason for streamlining of the SOEs was to ensure that government returned to its core functions.

The implementation, according to the sources, was derived from benchmarking exercises through field trips to Rwanda, Botswana and South Africa; around May 2022. The government was advised to prioritise the privatisation of commercial SOEs wherein RENAC falls into. ESEPARC advised government to commercialise RENAC and agree on a schedule to wean it off from subvention.

Meanwhile, sources claimed that government was advised to assess the airline business model to identify areas that need strengthening and also develop a schedule of costs associated with the maintenance of the State aircraft to allow for effective planning/resource mobilisation strategy that will be required from government from time-to-time. The sources said this was part of the implementation strategy which was set to ‘cut the umbilical cord’ between government and RENAC. In the report of the study undertaken by ESEPARC last year, government was advised that RENAC should implement an aggressive commercialisation strategy for all operations. It was said the SOE should use its earnings accrued from its commercialisation to subsidise operations and the maintenance of State aircraft.

ESEPARC also reported that the parastatal should establish a travel agency with an International Air Transport Association (IATA) Clearing House licence for competitive travel itineraries. The parastatal last year bought two aircraft which were not new, as they were previously owned by Air France – Hop, which is a full service regional airline for France.
The combined prices of the two aircraft were said to be US$3.1 million, which was about E47.43 million on March 5, 2022 when the exchange rate of US$1 was equivalent to E15.30.
Their procurement, it is understood, was in line with the ESEPARC study, wherein it was said RENAC had to establish a charter airline to subsidise the cost of maintaining the State aircraft. It was said the entity should also engage the private sector to establish an airfreight business through KMIII International Airport.

Recommendations

Meanwhile, initially, ESEPARC made nine major recommendations that provided the key framework for implementing the SOE reforms. The reforms have to specifically achieve: The Public Enterprise Unit (PEU) is to become the gateway for the creation, supervision, restructuring and dissolution of all public enterprises (PEs) in Eswatini, while government is to create effective regulators that focus on holistic sector regulation instead of cubic regulators within each sector. They also recommended that government had to create world-class utilities by supporting infrastructure development to ensure affordable, reliable and quality services and also enhance sector development by heightening and streamlining investing in the critical sectors of economy such as agriculture, ICT, business, education, health and financial sector, etc.

It was also recommended that government should streamline agencies focusing on a systems approach to reduce cost of implementing function such as administration and bureaucracy and also prioritise privatisation of commercial parastatals. In doing this, government was advised not to use a one-size-fits-all approach, but identify the best privatisation approach for each of the SOEs affected in this case. Worth noting is that a week ago, this publication reported that the Central Bank of Eswatini (CBE), the Centre for Financial Inclusion (CFI) and the Financial Services Regulatory Authority (FSRA) were among the first parastatals to be merged. The others are the Public Enterprises Unit (PEU), Eswatini National Industrial Development Corporation (ENIDC) and Sebenta National Institute. It was reported that Cabinet approved the implementation plan wherein six parastatals would be partaking in the implementation of the recommendations of ESEPARC for now. It was said among the six, some would be abolished.

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