13 December 2018

Namibia: Make Money or Cut Costs

OKERI NGUTJINAZO and LAZARUS AMUKESHE

THE government has given public enterprises until April 2019 to start making money or to cut down on excess costs, including salaries.

This directive follows finance minister Calle Schlettwein's proposal during his budget review presentation in October this year that public enterprises should be directed to focus on three areas - reducing salaries if they cannot raise money from their operations, restructuring their business models to focus on their core mandate, or looking into their systems to improve efficiency.

Schlettwein confirmed to The Namibian yesterday that public enterprises which rely on government bailouts were advised to equate their salaries to those of civil servants if they cannot raise money from their operations.

According to him, line ministers were asked to pass the message to respective enterprises that depend on the government for funding.

In the case that public enterprises cannot reduce salaries or staff, then they should look into ways of being more efficient, and raise money to pay salaries.

Although Schlettwein could not give a specific date, he said the directive would be considered during the 2019/20 budget.

Finance permanent secretary Ericah Shafudah also confirmed yesterday that there was a proposal that public enterprises which relied 100% on the government should align their expenses to those of the government.

The Namibian understands that according to the directive, commercial entities such as NamPower, the Roads Contractor Company (RCC), Namibia Wildlife Resorts (NWR) and Air Namibia should not expect money from the state for their operational costs.

Parastatals which entirely rely on the government, such as New Era Publication Corporation, Namibia Students Financial Assistance Fund and the Namibian Broadcasting Corporation will be expected to cut down on excess staff, or reduce salaries.

Sources told The Namibian that there were meetings held at the finance ministry this year, which were attended by public enterprises' line ministers and their chief executive officers.

During these meetings, the companies were asked to present their budgets for the next financial year, and justify why their budgets should not be reduced.

The Namibian also understands that there was a complaint about companies such as the RCC whose operational costs are funded by the government.

Currently, the RCC's wage bill is N$84 million a year, although most of the workers are doing nothing.

A November fiscal risk assessment report issued by the International Monetary Fund (IMF) also stated that parastatals play a strategic role in the economy, and should the prevailing poor management continue, it could cause fiscal collapse.

According to the report, the high-risk companies include NamPower, the Development Bank of Namibia, NamPost, Namport, the University of Namibia, NamWater, Telecom, TransNamib and Air Namibia.

The IMF reported that out of the 37 fiscal risks identified for the country, about 13 are related to Namibia's loss-making public enterprises.

According to public enterprises minister Leon Jooste, about 18 SoEs which are profit-driven have a N$62 billion asset value, N$30 billion liabilities, and an annual income of N$23 billion.

NamPower, which was singled out in the IMF report as the only state company with a plan, paid N$60,7 million in dividends to the government for the 2017/18 financial year for the first time in 13 years.

The Namibian reported in April this year that when the government approved new rules to increase the salaries of parastatal bosses and senior managers, the highest rated chief executives qualified to earn over N$2 million a year - excluding bonuses.

Parastatal executives would be paid based on three categories: Tier 1, Tier 2 and Tier 3.

These categories are based on the parastatal's income, the number of workers, market share, skills and total assets.

The guidelines showed that a chief executive in Tier 3 (which is the highest-paid category) would earn between N$964 000 and N$2 million per year, while under Tier 2, the bosses earn a maximum of N$1,3 million annually.

Under Tier 1 (the lowest-paying rank), the chief executive would earn a minimum of N$545 000 and a maximum of N$1 million a year.

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