State-owned enterprises (SOEs) in the country recorded a net loss of GH¢1.29 billion last year, the State Ownership Report has revealed.
The report, launched in Accra yesterday, said, however, that the losses were a reduction over similar losses recorded in 2016.
According to the report, the bane of SOEs was their chronic inability to contain costs, as their aggregate operating cost increased by 56.5 per cent last year.
“This is of concern, given that inflation and interest rates have been on a downward trajectory,” the Senior Minister, Mr Yaw Osafo-Maafo, said when he launched the report at the second annual SOE Policy and Governance Forum in Accra.
The two-day event, being organised by the Ministry of Finance is on the theme: “Promoting good governance in the SOE sector through accountability, transparency and integrity”.
The report indicated that there was a highly unsatisfactory compliance by SOEs and Joint Venture Companies (JVCs) with reporting and disclosure provisions in legislative and regulatory requirements governing their operations.
It said only 48 out of the 86 entities repeatedly contacted by the Ministry of Finance submitted requested information, while no SOE, including the 33 covered in the report, had submitted their 2017 audited financial report as of the end of April this year.
That, the report indicated, was contrary to reporting requirements stipulated in the Public Financial Management Act (PFMA) 2016 (Act 921).
The PFMA, particularly sections 4, 5 and 6, confers defined powers on the Minister of Finance and the Chief Director of the ministry in their oversight of SOEs. These include the appropriate sanctions regime that the minister is empowered to exercise in respect of errant SOEs.
“I would like to make it absolutely and unequivocally clear that the minister has the full and unconditional support of the Cabinet should he choose to exercise his powers under the law in our quest to promote accountability,” Mr Osafo-Maafo reminded all.
He indicated that SOEs held about 50 per cent of the country’s national assets and had controlling influence on the other half, including the activities of the private sector.
They were also engaged in all key sectors of the economy, notably power, energy, petroleum and agriculture, and thereby served as the bedrock of economic development, the senior minister stated.
Yet, Mr Osafo-Maafo said, dividends paid by many of them were not commensurate with the volume, type and size of investments made in them.
“It is not a question of going to declare dividend and giving the government GH¢100,000 when, indeed, the size of government equity in that business should have given the government GH¢5 million. So we have a real serious challenge with returns on investment,” he complained.
The senior minister said it was, therefore, incumbent on all stakeholders and Ghanaians to reverse the trend of sub-optimal performances that had traditionally characterised the SOEs, compared with their counterparts in the private sector.
Highlights of the report
The Director of the Public Investment Division of the Ministry of Finance, Mr David K. Collison, said the report covered 33 SOEs and 16 Joint Venture Companies.
He said the energy sector had 19 per cent, 27 per cent for the financial sector, agriculture and infrastructure constituted 17 per cent each, with manufacturing and communications comprising 10 per cent each.
Mr Collison said the JVCs cumulatively made a net profit of GH¢800 million and paid dividend to the tune of GH¢44.36 million
The SOEs paid dividend of GH¢259.5 million, while mining companies in which the state has carried interest paid GH¢91.48 million.
On employment, he stated that 45 entities employed 49,101, with 32 SOEs creating about 74 per cent of the employment.
The report also indicated that the government’s fiscal exposure to the SOE sector amounted to GH¢8.23 billion of outstanding on-lent loans (loans the government contracted on their behalf or with sovereign guarantee).
Only GH¢29 million out of GH¢1.2 billion of the debt service due was honoured, representing a debt service rate of 2.5 per cent.
The Minister of Finance, Mr Ken Ofori-Atta, for his part, said the government had adopted an action plan to improve governance of the SOEs by enhancing good corporate governance practices in individual companies in the sector.
The action plan, he said, was premised on improving the legal and regulatory framework, strengthening government ownership, professionalising the boards of SOEs and enhancing transparency, accountability and disclosure.
Mr Ofori-Atta said the boards of four SOEs were currently piloting those corporate governance improvements.
“The successful implementation of these action plans will not only make our SOE sector the leader in corporate governance reforms but, even more importantly, improve the decision-making process in the management of SOEs,” he stated.
The World Bank Country Director, Mr Henry Kerali, who also spoke at the event, said ensuring that board members and executives had the requisite expertise, management experience and technical skills would go a long way to improve the performance of SOEs.