Home | News | STILL NO MERGER, GOVT TO SPEND E2.4BN ON 50 PARASTATALS

STILL NO MERGER, GOVT TO SPEND E2.4BN ON 50 PARASTATALS

05/02/2024 08:48:00 Stanley Khumalo

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MANZINI – Government will again subvent parastatals with over E2.4 billion while a report recommending their merger is yet to be presented to Cabinet.

The State-Owned Enterprises (SOEs) Restructuring Framework in Eswatini Report, which was compiled by the Eswatini Economic Policy Analysis and Research Centre (ESEPARC), recommended that the SOEs should be merged to about 31 in total. This report was published on November 31, 2021, and presented to the 11th Parliament before launching the first phase of the merger of SOEs. However, the speed at which things are happening has led some economists to bemoan that financial resources which could assist the country to stop heavy reliance on the Southern African Customs Union (SACU) receipts were going to ‘waste’.

Burden

Currently, there are 50 SOEs and according to the ESEPARC report, Eswatini’s parastatals were now a huge burden on the economy and on the fiscus, with transfers to Category A parastatals being about E2.4 billion in 2020/21. In an effort to understand what was stalling the implementation of the report as per its recommendations, the Communications Officer in the Ministry of Finance, Setsabile Dlamini,stated that some economists believed the proposal by ESEPARC on the merger of SOEs was viable and should have been implemented by now. In light of this, she was asked at what stage was the merger of the first six parastatals. These were the Central Bank of Eswatini (CBE), Financial Services Regulatory Authority (FSRA) and the Centre for Financial Inclusion (CFI). Also, Sebenta National Institute had to be repurposed for the establishment of one non-formal education institution to co-ordinate skills development centres such as MITC, Mpaka and Nhlangano Vocational Centres, while Eswatini National Industrial Development Corporation (ENIDC) had to be dissolved.

On the other hand, the Public Enterprise Unit (PEU) had to be transformed to become the gateway for the creation, supervision, restructuring and dissolution of all public enterprises in Eswatini. Dlamini was also asked to elaborate on which stage were the entities which were recommended to be abolished at and to further articulate the set timeframe for the completion of the aforementioned endeavours. The communications officer was also informed that it was the belief of economists that some government departments replicated the very same tasks assigned to parastatals under them, which resulted in the duplication of responsibilities. She was asked if this was not costly for government through subventions. In response, she said: “Please note that the report on the SOE reforms is still to be presented to the current Cabinet for their input. It is, therefore, not prudent to comment on it for now.”

It is worth noting that the 11th Parliament’s Cabinet had adopted the report and started implementing it. The incumbent Cabinet has eight ministers who retained their positions while 12, including the head of government, are having their first term in office. On the other hand, while the report is yet to be presented to the 12th Parliament’s Cabinet, economists said government was in an awkward position in terms of improving its fiscus. University of Eswatini (UNESWA) Economics Lecturer Sanele Sibiya said the delay in implementing the ESEPARC report was costly as it projected in 2021 that the administration could repurpose about E1 billion to other essential items.

Sibiya termed the E1 billion as low-hanging fruit which would assist the administration to, among other things, manage the parastatals as a business instead of having them heavily reliant on it for bail-outs and or day-to-day management. Sibiya said: “The implementation of the report is long overdue and government could be investing in projects such as infrastructure development and or cushioning the taxpayer from inflation.” He said it was disheartening that the administration had good intentions but failed to implement what was articulated for it to detach itself from the financial abyss it was currently in due to subventing the parastatals. The economics scholar said the projected E1 billion savings that would come from merging the parastatals could even bring relief to the country as it would start savings that would lead to a cushion when SACU receipts were low.

ESEPARC, in its study, stated that even if an entity was profitable, there could still be economic reasons to consolidate it. It stated that this exercise was necessary to resuscitate the economy and improve the fiscal space for funding social and economic development. It highlighted that there was a need to avoid or stop monetised mandates but focus on government’s core business – its development mandate. “The enterprises need to chase development instead of chasing profits. The SOEs are an extension of central government; they are specialised semi-autonomous departments that are implementing government’s development agenda in a flexible and agile manner,” it reads in part. ESEPARC reported that the issue of human deployment in these parastatals also needed rationalisation as the PEU Act has created another central government within these SOEs, starting at Board level down to the operations of the individual public entities.

Privatisation

On the other hand, another economist said government should stop subventing SOEs and start a privatisation programme immediately. He said privatising the parastatals could make them more efficient as they would be accountable to shareholders who were looking at profits. In implementing their privatisation, he opined that government should also skate carefully and avoid the challenge of creating monopolies. “They should sell shares to the public but have a rule that, for example, an individual may not exceed a certain percentage of shareholding as that would be problematic,” he said. He said this would allow government to invest in critical sectors.

The economist said that information, technology and communication (ICT) was key and an investment in it from primary level could easily be achieved as there were a variety of resources which were currently being misused. Meanwhile, the International Monetary Fund (IMF), in its occasional paper 194, titled ‘Fiscal and macroeconomic impact of privatisation’ states that privatisation has been a key element of structural reform in many developing and transition economies during the last decade. It is worth noting that the recommendations of the ESEPARC study included the strengthening of the PEU and remodelling it into a fully-fledged and fully capacitated agency managing and monitoring the performance of SOEs in the country.

It also suggested that a system of clear and effective incentives be designed and implemented to reward the managers and employees for improvements in efficiency, productivity and consumer satisfaction. However, it highlighted that a one-size-fits-all approach would not be effective and sustainable, particularly for the purposes of monitoring performance and tracking progression towards the realisation of key performance indicators.

Reform

The review further encouraged the scope for reform to be considered in its broadest sense to go beyond privatisation and look into the wide spectrum which may include rationalisation.
Some of the reforms highlighted were the conversion of Eswatini Electricity Board (SEB) in December 2007 to the Eswatini Electricity Company (EEC), a private entity. Also, other enterprises noted were the Royal Eswatini National Airways (which formed a joint venture with South African Airways to form Swaziland Airlink) and the commercial arm of the Eswatini Dairy Board – are partially privatised.

In part, the report recommended that six government agencies must be streamlined. These agencies are the Eswatini Revenue Service (ERS), Conciliation Mediation and Arbitration Commission (CMAC), National Disaster Management Agency (NDMA), Sincephetelo Motor Vehicle Accident Fund (SMVAF), Eswatini National Provident Fund (ENPF) and the Public Service Pensions Fund (PSPF). It also recommended that government should complete and close out parastatals implementing specific projects that have run their course. Also, it was recommended that these entities should be completed and closed in a period of 12 months.