Namibia: Allow Private Sector to Take Part, IMF Urges Govt

16 September 2019

Public enterprises are key institutions in the delivery of essential services and correcting social imbalances, but they are also sucking the government dry and it is time to invite the private sector to the table, says the International Monetary Fund.

The fund made this call following the conclusion of the Namibian Article IV consultation that ended in June this year with the full report on all findings only released on Friday.

"Public enterprises often provide costly production inputs, and with a few exceptions, represent significant burden for the budget (about 9,5% of GDP per year) and a source of fiscal risks for the government," the fund said.

The IMF called for authorities to enhance private sector participation, stating that the recent relaxation of entry into the electricity market and re-privatisation of the telecommunications operator is not sufficient.

"The government should create reforms that focus on sustainable recovery plans for failing enterprises like Air Namibia and TransNamib, and enforcing strict limits on wage structures," the fund said.

The fund's board stressed that public enterprises should make clear distinctions between commercial activities and social activities, in order to run the institutions efficiently. The fund also suggested that occasional service tariffs reviews be done.

Among other things, the fund as well suggested that to lessen the burden of these institutions on government, a review of the mandates of certain institutions should be done to enforce stronger accountability measures when appointing board members, and on publication of statements.

"The government's initiatives to support infrastructure investment through off-budget financing like public-private partnerships (PPP's) and public enterprises investment financing is commendable," the IMF noted.

The fund, however, warned that often off-budget financing activities on public projects may threaten transparency of fiscal accounts and create liabilities that may derail budget efforts.

"To manage and control these risks, it is critical to further develop the fiscal risks framework, publish a risks statement, and widen the coverage of fiscal accounts beyond the central government," the fund's board suggested.

Last year, The Namibian reported that treasury had given public enterprises until April 2019 to start making money, or to cut down on costs, including salaries.

In his budget speech this year, finance minister Calle Schlettwein said public enterprises needed to demonstrate that they were delivering value for money in goods and services to the public, who were effectively paying taxes to subsidise state-owned enterprises.

Public enterprises were allocated N$1,08 billion for the year ahead, compared to N$1,13 billion for the 2018/19 financial year, with insolvent Air Namibia set to receive N$499,9 million -nearly half of the funds allocated to SOEs.

* Additional reporting by Lazarus Amukeshe

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