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State firms seen crucial for development

That is so because SoEs and public enterprise (PEs) are often the principal suppliers of public services, create jobs, offer skills development and generate revenue for the government.Equally, the underperformance of SoEs/PEs results not only in poor returns to the treasury but also could lead state to subsidise these enterprises.

Worse enough, poor performance can also have a more direct impact on citizens when services in key sectors are insufficient and unsatisfactory, the like of current erratic, power and water supply across the country.Bearing that in mind, discussion lingers on in the government corridors for the state to stop appointing chairpersons and chief executive officers of  SoEs to allow competent individuals vie for the posts.

Currently, the president and ministers fill the vacancies through handpicking people of their own choice, a system blamed for unaccountability and inefficiency in public firms.Finance and Economic Affairs Minister William Mgimwa said the government wants to reverse the system and fill the top posts in SoEs through merit based candidature to increase efficiency and productivity of public firms.

“We are heading toward merit based recruitment of top officials in public enterprises,” Dr Mgimwa told the ‘Business Standard’ on the sidelines of a Corporate Governance in SoEs forum organised by Uongozi Institute.The forum, aimed at sharing experiences that encourage debate among leaders from government, the private sector and civil society.

The minister said that improving the performance of SoEs through sound governance practices will greatly improve economic and social well-being of the country.He said: “The underperformance of SoEs results in poor returns on government capital and sometimes costs the government in terms of subsidies paid from the treasury coffers.”

Dr Mgimwa said that the main challenge the government faces is balancing between its responsibility to exercise ownership to achieve vision and profitability without influencing SoE management.A South Africa’s Corporate Lawyer and Lecturer, Ms Thina Siwendu, told the forum that most African SoEs and public enterprises worked without clear objective and strategies while they have multiple lines of accountability and reporting to.

“Decision making becomes hostage to politics of the day… (while) accountability is diffused in confused roles,” Ms Siwendu, a founding partner and CEO of Siwendu and Partners Inc, said.As a result, SoEs and PEs are plunged into lack of responsibility and responsive leadership amid misallocation and loss of public funds and ultimately the institutions sink into ineffectiveness.

The forum comes at a time when a number of SoEs in the country are inefficient, lack transparency, are incompetent and corruption.Due to failure to deliver, state enterprises like Tanzania Electric Supply Company, Tanzania Port Authority and Tanzania Bureau of Statistics have their CEOs suspended to pave the way for investigations into allegations of corruption and incompetence.

Since the country adapted the market economy about two decades ago, there have been a number of suggestions to improve the effectiveness and competencies of the SoEs and PEs.Stakeholders are pushing for common law and regulations on running the SoEs and PEs instead of leaving the parastatals to have independent policies, regulations and guidelines.

The common law is necessary because SoEs have bigger picture implications, which is another reason for endorsing their good governance practices.“Being SoEs, these enterprises have an obligation to support the government’s strategic goals and alignment to policy agenda, in addition to being viable and efficient in their mission.”

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