Government urged to set profit target for SOEs
Executive Director of the Policy Initiative for Economic Development, Dr. Daniel Amatey Anim, has urged government to set targets for state owned enterprises if they are to become profitable.
He noted that lack of set targets plus effective monitoring and evaluation is a menace to growth for most of the state institutions.
He added that if government allows the SOEs to operate independently, without their support, the SOEs will live up to expectations.
“I’m of the view that if we should have targets set for them and those targets are being monitored closely, they can live up to expectations and so basically they are making losses because they know at the end of the year there will be interventions from government,” said.
“But if they are allowed to generate their own revenue and to support their own budget and even make some revenue for the state, I’m of the view that they will do right thing and be able to make more revenue for the state. So principally because these measures, these mechanisms are not in place, that is the reason why most of our SOEs are not doing well,” he said.
Aggregate revenue outturn from State Owned Enterprises (SOEs) to government for the 2020 review period amounted to GHS 45.23bn.
Per the 2020 State Ownership Report by the Ministry of Finance, the GHS 45.23bn revenue recorded by SOEs for 2020, marks a revenue increment of 20 percentage points when compared to the 2019’s revenue performance of GHS 37.91bn.
In terms revenue losses, SOEs recorded some GHS 2.61bn losses in the year under review.
The recorded loses for 2020 represents a 49.2 percent improvement on the 2019 aggregate net loss of GHS 5.16bn.
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Joint Venture Capital (JVCs) on the other hand, achieved an aggregate net profit of GHS 11.81 million as compared to an amount of GHS 1.05 billion recorded in 2019 representing a significant decline.
According to the report, the devastating impact of the COVID-19 pandemic tended to disproportionately affect JVCs and severely hampered their revenue-generating ability.
Government’s Minority Interests in mining firms resulted in an aggregate net profit of GHS 11.25 billion in 2020 as against a net loss of GHS 62.17 million for 2019.
Touching on the adverse impact of the Covid pandemic on State Enterprises, the Finance Ministry in the report noted that decisive and bold measures were taken to support businesses in both the private and public sector with government providing payroll support of GHS 127.5 million for the worst affected SOEs, JVCs and tertiary institutions whose operations were severely impacted by the closure of our borders and the imposition of movement restrictions.
Adding that, given the impact of the pandemic, expectations on the performance of State Enterprises had to be recalibrated.
“The Bank of Ghana also announced complementary measures to support businesses. Against these developments, expectations on performance of SEs have to be recalibrated. That said, and as we seek economic recovery to build forward better, it is crucial to emphasize that the practice where loss-making SEs continuously increase operating expenses (OPEX) through personnel and wage increases must give way to sound business management practices. All SEs, including almost the third of Other State Entities (OSEs) that recorded deficits, must reimagine their business models and strive for prudent financial management and operate within budget,” added the report.
