Angola: Public Companies Assets Represent 45 Percent of GDP

Luanda — The Angolan public companies' assets represent about 45% of all Gross Domestic Product (GDP), the State secretary for Budget and Public Investment, Aia-Eza da Silva, said last Thursday in Luanda

Speaking at the opening ceremony of the 2018 Public Enterprises Account Report presentation, Aia-Eza da Silva underlined that that the economic relevance of the public business sector (SEP) is undeniable, as it holds more than 80 companies on the main sectors of the economy, hiring more than 50.000 workers.

From her perspective, the finance performance of the sector presents various challenges, as it's been seen a growth of the public debt (Particularly boosted by the public companies SEP).

The strong limitation on the General State Budget (OGE), caused by the actual economic scenario, the international commitment with the International Monetary Fund (IMF) and other creditors, beside other commitments at the public investment level, are equally seen as challenges.

He noted that such a scenario obliges a reflection on the viability of the model of direct and indirect subsidies, among other types of institutional support of recent years, which, due to their magnitude, compromise ongoing efforts to improve the quality of public spending.

The official said that the Public Business Sector is expected to be able to provide good services and contribute to economic growth and poverty reduction.

"Over the last few years, a number of measures have been implemented and at this stage we have to agree that we are falling short of achieving the goals in full," she said.

Although state-owned enterprises benefit from state support through various subsidies, they in turn hardly provide taxes and dividends to the state, and between 2014 and 2017, taxes paid by for-profit state enterprises constitute between 4 % and 6% of total tax revenue - most of which comes from Oil and Gas. Regarding state functions, Aia-Eza da Silva understands that the main focus should be on the implementation of robust programme contracts, focused on the obligation of measurable public services and efficiency gains.

To the Secretary of State, it is equally important to increase the transparency of public companies' debt, to make inventory of cross-debts between public companies and to set limits on inter-company and other related indebtedness. With regard to financial reporting and auditing standards, she noted that all large companies in the SEP should be required to apply International Financial Reporting Standards (IFRS) and have their financial statements audited in accordance with International Auditing Standards (ISA).

With regard to companies whose leverage will go through a future sale, Aia-Eza da Silva assures that this may be through the adoption of Public-Private partnerships as alternatives, in which the State has shared obligations to value the asset for future sale, or launching a privatization process, where the main focus of the state will be the sale of the asset. With regard to the Executive Privatization Programme, which foresees the sale of 195 public assets, he said that additional critical conditions were still identified for the success of the SEP reform, taking into account international best practices and the specific starting point.

It was considered essential that IGAPE (Institute of State Assets Management) increasingly asserts itself as an institution with a higher mandate, enabling it to fulfill its defined duties, namely to regulate and monitor the activity of the SEP, acting as the true representative of the State (owner), including the interaction with the various sections of the sector.

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