How to make State enterprises tick

In one recent article I discussed why some statutory corporations (SCs) or parastatals or indeed, in short, State enterprises continue to make losses year-in and year-out, in the process burdening the taxpayer to bail them out.

I argued that it was ironic that State enterprises make losses in sectors where they do not have competition and are monopolies, such as water and electricity supply.

Prevailing tough economic environment has been mentioned as one of the factors contributing to the poor performance. However, private sector players operating under similar conditions are managing to break even and, in some cases, making profits. Why are government entities struggling?

I mentioned political interference in the appointment of executive management, the boards of directors and general operations as some factors. Poor or lack of corporate governance is yet another factor.

Following a recent article, Why State Enterprises Fail To Tick, I got some interesting feedback from several readers most of whom shared my view point. I will share some of the feedback as follows:

Hey Aub,

In addition to political interference in the appointments of the top brass of these ‘enterprises’, I would say that there is general laziness and a laisse faire attitude in these institutions [State enterprises].

People do things at their own pace. There is need for mindset change. For instance, when you have an appointment with a manager of these organisations at 9am, chances are that you will see him [or her] at 10am; when they call for a meeting at 8am, the meeting starts at 9.30am. And this is the case even with their board meetings!! Imagine that… Unacceptable.

I can go on and on with examples. I am in the system now and it is so frustrating.

Regards

For the record, the above feedback came from a reader who has worked in managerial positions in the private sector and recently joined one of the parastatals.

More feedback came from another reader who mentioned poor leadership and governance of most State enterprises as a contributing factor to poor performance.

Wrote this reader: “There is also too much political influence and patronage in parastatals. There are no performance targets. The main qualification is political loyalty.”

No performance targets in the reforms era? Now this is serious!

Another reader, who is very familiar with operations of the parastatals, argued that little is done to change the status quo because “unfortunately” some of the parastatals are regarded as cash cows for the government and politicians; hence, the heavy control to promote personal interests at the expense of the nation.

The reader added that the “toothless law enforcement agencies” worsen the situation as they have made some public officers to be above the law.

In a commentary in a story published in The Nation recently, corporate strategy expert James Kamwachale Khomba, a professor of finance and corporate strategy at University of Malawi’s the Polytechnic, also attributed the underperformance of parastatals to leadership and management style.

It is possible to improve the situation. To turn around the ailing State enterprises, the Public Service Reforms Programme currently underway should stress and embrace corporate governance in the enterprises to realise their worth instead of carrying them on the shoulder through subventions and bail-outs. Business unusual should take the centre stage.

Much has been said about improving the performance of State enterprises. The ball is in the court of the authorities.

I am looking forward to reading an inspiring report about the performance of the State enterprises in the next Malawi Government Economic Report. n

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