The Namibian (Windhoek)

18 January 2013

Namibia: The Heavy Opportunity Cost

analysis

THE money that the government spent last year to keep its companies in business could have built 10 top-notch regional hospitals or 100 schools or 600 commuter buses carrying about 60 people. It's all about choices and very often tough ones.

The minister of works and transport, Erkki Nghimtina, should thus be commended for publicly, at least, reminding Air Namibia that the national airline's begging-bowl syndrome must come to an end and that its managers must make the tough calls.

Several government-owned businesses, Air Namibia being the most notable, entirely depend on taxpayers to stay in the market even though they were set up as for-profit companies. And while many of them have consistently failed to make money, they go about changing the reasons for their existence to justify the wanton raids on tax revenue.

For example, a few years ago Air Namibia came up with a highly questionable research document by unidentified economists who claimed that the company cannot be allowed to wither away because it contributes far more to the economy than to give in to taxpayer worries about its constant bailouts. The argument politicians like to make is that apart from showing off the country's flag in the skies, Air Namibia brings tourists to the country and thus creates jobs and earns foreign currency. Its backers like to have the world believe that without Air Namibia and its unsustainable costs to the taxpayer, the country will not have visitors.

The fallacy that it's unavoidable that Air Namibia must remain in its current format is exposed by countries like Botswana, whose tourist numbers outstrip Namibia's and where top-paying visitors go to spend their time, meaning they get tourists who are also cheaper to maintain. Namibia's case is the opposite to Botswana's, whose national airline is nowhere near the size of Air Namibia.

As Nghimtina alluded in an interview with The Namibian this week, Air Namibia's existence largely subsidises non-Namibians and people who already have money [people who choose to fly are often those who are well off].

Over the past decade or so Air Namibia has siphoned at least N$3.5 billion from taxpayers to keep it in business. That amount would cover the ministry of health's needs for an entire year (caring for about two million people instead of 400 employees of Air Namibia).

Perhaps the pain for the many needy Namibians would have been less if Air Namibia was the only parastatal requiring bailouts. But a large number do.

Nearly every year for the last 10 years the government has spent about N$1 billion on its poorly run business entities, companies that were set up to generate profits or at the very least generate incomes that enable them to cover their own costs. Instead, taxpayers have watched as a lot of the money was spent on what in many cases amounted to pet projects.

For instance, billions of dollars were pumped into a railway line (Tsumeb to Oshikango), which has now been idle for nearly 10 years. Sadly, the railway to the most important harbour of Walvis Bay remains in a dilapidated state and for 23 years the government claimed it could not provide free education as the Constitution requires to young Namibians.

While Nghimtina is making the right noises about Air Namibia, his stewardship of the Namibia Airports Company and TransNamib boggles the mind, for they are in as bad a mess as the airline. But that's a discussion for another editorial.

Nghimtina's impatience with Air Namibia should be taken up by the entire governing class: parastatals, especially the for-profit or 'self-paying' ones, should be overhauled, starting with them adhering to basic principles such as having transparent accounting systems. Namibia Wildlife Resorts, Air Namibia, TransNamib and several others go years without publishing audited financials annually as is required by law. If basics cannot be adhered to, how do we expect them ever to get their houses in order?

Most importantly, however, is for the politicians to get the governance structures right. Money-making parastatals, for instance, should fall under one political head who will ensure that their reporting conditions are the same and well enforced across the board. The prime minister's office would be a good central point for this. After all, many of those parastatals are ministries in structure and stature, and having several politicians to account to only complicates corporate governance.

Nghimtina has made it clear - it is time to make the tough choices. People in poor households make them all the time and these are the families who need help more than the parastatals sucking the country dry.

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