5 PARASTATALS RECORD E2.6 BILLION DEFICITS

MBABANE – Apart from heavily relying on government subventions, five parastatals are facing financial challenges with glaring deficits and there is a strong need for financial assistance.

Some of these government parastatals are profit-making entities, which are supposed to be revenue-generating and boosting government coffers but that is not the case.
These are the University of Eswatini (UNESWA), Eswatini Television Authority (ESTVA), Eswatini Civil Aviation Authority (ESWACAA), Pigg’s Peak Hotel and Royal Science and Technology Park (RSTP). These entities have a combined deficit of E2.6 billion and the Auditor General (AG) Timothy Matsebula, through the compliance audit report, has asserted that government might be indebted to rescue the public enterprises.

ESWACAA has the biggest deficit of the five parastatals, which stands at E1 348 832 659. Matsebula, through the report, stated that this means the entire investment made by the shareholder (government) was at risk of being drained and the shareholder might be indebted to rescue the public enterprise. The controlling officer in the Ministry of Public Works and Transport, Thulani Mkhaliphi, concurred with Matsebula’s observation and he stated that the ESWACAA’s reliance on the subvention grant from the Government of Eswatini was correct. He said the authority suffered a reduction of about E7.5 million in landing, overflight, parking and permit fees, while airport tax collections were reduced by about E2.3 million as a result of the reduced activity that was necessitated by the effects of the COVID-19 pandemic.

Loss

Financial statements indicated that UNESWA incurred a net loss of E189 172 410 during the year ended March 31, 2021. In the previous financial year ended March 31, 2020, the university had made a loss of E146 902 465. As a result of incurring losses over the years, the university had an accumulated loss of E1 087 171 217 as at March 31, 2021.  Matsebula said this meant that the university was spending beyond its income and, therefore, struggling to meet its obligations, hence depending (trusting) on the government to rescue it. His concern was that if the situation did not change for the better, this important service that the university was created for would not be sustainable in the foreseeable future. Coming out to openly declare that they needed a bailout from government was ESTVA, whose newly-appointed Chief Executive Officer (CEO) Andreas Dlamini, revealed that they needed at least E200 million. Matsebula revealed that there were material uncertainties which threatened the ability of the TV station to continue delivering services to the public and achieve its mandate.

Uncertainties

The AG submitted that the indications of existence of material uncertainties included a cumulative loss of E115.6 million, a negative equity investment balance of E108 million, an employee costs exceeded the total income received by the authority by E567 585. It also include an employee pension liability of 17.5 million, trade payables of E116.4 million, current liabilities exceeded current assets by E94.2 million, unremitted taxes amounting to E82 759 507 to the Eswatini Revenue Service (ERS) and liabilities exceeded assets by E108 million.
Government ministries and parastatals were cited as the main perpetrators in Pigg’s Peak Hotel’s E6.7 million expected credit losses which were deemed irrecoverable.

According to the compliance audit report, the expected credit losses whose exact amount is E6 749 395, are estimated irrecoverable receivables from the outstanding balance of E7 007 905, which management of the hotel believes that they might not be recoverable. On RSTP, Matsebula said the public enterprise continued to make significant deficits that were far higher than the subvention received from the government and the cumulative retained deficits amounting to E278 071 175 at the year-end.

According to a recent analysis of the performance of State-owned enterprises (SOEs) in Eswatini, which was prepared by the Eswatini Economic Policy Analysis and Research Centre (ESERPAC), SOEs working within the tough openly competitive and purely commercial markets yet without the requisite institutional infrastructure do struggle to keep afloat and the best was would be to restructure them and set them on pathways as purely commercial entities, run by corporatised codes of conduct and practice. The analysis depicts that the government of Eswatini should avoid setting up SOEs to compete with the private sector, which in most cases ends up crowding out the already thin private sector. It states that government should set up SOEs to provide services where the private sector would not, to create new markets and to induce growth that will expand the private sector and, thereby increase the economic and tax base.

Remuneration

The analysis comes with a recommendation that the public enterprise unit needs to develop performance measurement system (PMS) appropriate contracts and remuneration structure for executives of the public enterprises. “A critical element of the PMS is to ensure that key performance indicators align with the mandates of the public enterprises,” reads the recommendation. Another recommendation states,that the public enterprises governance structures need to be reformed to improve performance and accountability. Board members need to understand that their fiduciary responsibility in the public enterprises is to serve the interests of government and the overall sustainability of the public enterprises. Meanwhile, Minister of Finance Neal Rijkenberg stated that entities like ESWACAA and RSTP were in deficits not because they were reckless in spending, but these were funds that government pumped in to build the entities.

He made an example that at ESWACAA, the liabilities were in respect of funding to build the airport and at RSTP, it was the infrastructure and in their books they recognised the monies that government pumped in. It is UNESWA that the minister said got themselves in trouble as they are not paying pay-as-you-earn (PAYE) and were employing people when they felt like doing so. The minister then stated that there would be a supplementary budget in December like the country normally did and application for funds from these entities would be considered on their urgency.

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