State plugs leaks in parastatal organisations
The Minister of Public Enterprises, Leon Jooste said this week in a question and answer session that the the Institute of Public Policy Research (IPPR) that some Public Enterprises (PEs) will be merged, absorbed into ministries and listed on the Namibian Stock Exchange.
Jooste said that many State Owned Enterprises (SOEs) have largely failed to implement their respective mandates. New Remuneration Guidelines will mark the introduction of a Performance Based system for all civil servants.
However, the hybrid nature of this system, IPPR believes, that this will not guaranteed better governance as many SOEs still fall under line ministries, several of whom have failed at ensuring good governance in the past. The report says that ensuring that the line ministries also live up to the high standards, implementation of the governance model will be a difficult task.
The dual governance model which has been used in Namibia since 2006 is generally accepted to be one of the most ineffective models around. “It quickly became obvious that the attempt to govern our PEs in flawed governance models is one of the fundamental root causes for the failure of PEs,” Jooste said.
The performance agreements between the Minister and individual Board members and between the Board and the CEO and downwards will be a legal requirement. Jooste said, that this might see non-performing SOE boards penalised.
He added that the performance based system will also evaluate financial, operational and strategic performance, that globally PEs are broadly governed in decentralized, dual and centralized governance models.
“The final element is that the new Remuneration Guidelines will be incentivised with performance-based remuneration,” Jooste said, adding on that this is a major shift from the current system where Boards and Managers are remunerated according to their tier classification regardless of performance.
By adopting a hybrid governance model marks a significant departure from previous models which Jooste believes was integral to finding the root cause of the ailing SOEs. There is a global tendency to migrate towards centralized governance models. “In our case, we have both commercial- and non-commercial PEs which is why the hybrid model is required,” Jooste said, in response to why such an action to regulate the agencies is needed.
Currently the priority is for the commercial PE to be governed within a centralized model while non-commercial PEs will still continue to be governed within a dual-governance model.
“This model will provide us with the required governance infrastructure to reform our PEs while still leaving room for further evolution,” Jooste said on the new model that benchmarked countries that have proved to be successful in this particularly area such as Norway, Sweden, Malaysia and New Zealand.
Progress has been made after requests from Parliament last year for more information on the
governing bodies of SOEs. Jooste said that Performance Agreements will be upgrade to include compliance to legal provisions by the SOE governing bodies with failure to adhere may result in dismissal.
The new plan includes requirements for SOEs to publish their annual reports and sanctions if this does not occur.
“The submission of Annual Reports is a legal requirement and has to be submitted within 6 months after the financial year-end.”
Jooste said, adding that a comprehensive list of governance principles and directives to ensure good corporate governance and prevent conflicts of interest for management personnel.