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E500 MILLION PEU FUND FOR MERGING OF PARASTATALS

04/04/2022 08:38:00 Stanley Khumalo

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MANZINI – The budget for the merging of parastatals will be sourced from the Public Enterprise Unit (PEU) Loan Guarantee Fund (LGF), where E500 million is currently available.

This follows that government has approved the engagement of Eswatini Economic Policy Analysis and Research Centre (ESEPARC) for the implementation process of their study. The Communications Officer in the Ministry of Finance, Setsabile Dlamini said the implementation of the recommendations by ESERPARC had been given a go ahead. Dlamini said during the implementation process, ESERPARC shall get approval for all actions taken. The communications officer was responding to a questionnaire which sought to establish if government had approved the implementation of the study by ESERPAC and if yes, how much was set aside for this process.

She said: “There is no precise amount and it will be dependent on the actions being taken. We can confirm that there is some money from the LGF Fund that will be used to this exercise.”
This publication has it in authority from impeccable sources that the PEU LGF currently has around E500m in it and Cabinet agreed to use this fund to pay for the reformed process.
Like Dlamini, the impeccable sources clarified that at this point, it was difficult to know exactly how much would be needed for the implementation process as government sought to minimise the State-owned-enterprises (SOEs) from 49 to about 30.

The reduction of the SOEs, according to the Minister of Finance, Neal Rijkenberg, could result in savings amounting to E1 billion. He said this during the post-budget seminar hosted by the Central Bank of Eswatini in collaboration with the Economics Association of Eswatini (ECAS) last month. He said the objective of the exercise was to improve the parastatals performance as it had been reported that in recent years, a majority of them drained government, given that they survived on subventions. According to the ESERPAC report, Eswatini’s SOEs, were now huge burden on the economy and on the fiscus, with transfers to Category A parastatals approaching the E3billion mark (E2.4 billion) in 2020/21.

Given the escalating expenditure on the SOEs, Dlamini was sought for comment on the breakdown of how the money to be sourced from the PEU LGF would bring changes in terms of the number of employees under SOEs. She was asked how much would be used for offering voluntary retirement packages to the employees, Dlamini said: “The budget will be determined by the establishment of the framework of the implementation process.” The communications officer was also sought to establish how many employees would be absorbed in the new structure. To this, she said, it was pretty much early to pre-empt a process that had not started. Dlamini further said once the implementation began, then it would have indications of employees to be absorbed.

It is worth noting that the recommendations of the ESERPARC study included the strengthening of the PEU and remodelling it into a fully-fledged and fully capacitated agency managing and monitoring the performance of SOEs in the country. It also suggested that a system of clear and effective incentives be designed and implemented to reward the managersand employees for improvements in efficiency, productivity, and consumer satisfaction. However, it highlighted that a one-size-fits-all approach would not be effective and sustainable, particularly for the purposes of monitoring performance and tracking progression towards realisation of key performance indicators. It was also stated that it was important to enhance SOEs’ capacity in data collection, reporting and knowledge management, including making use of their often obsolete and outdated websites and digital media platforms.

“High staff turnover and incapacity to attract skilled labour emerged in the review, with poor conditions of service and the issues of inadequate skills and limited capacity to retain highly qualified personnel (due to low remuneration and incentives)had a bearing on performance and delivery on set mandates among many of the SOEs,” reads in part the report. The review further encouraged the scope for reform to be considered in its broadest sense to go beyond privatisation and look into the wide spectrum which may include rationalisation. The report stated that the current number of SOEs showed that the government’s privatisation agenda had been slow. It was said although there were delays in the implementation of policies;some reforms had led to the privatisation of local public enterprises.

Some of the reforms were highlighted the conversion of Eswatini Electricity Board (SEB) in December 2007 to the Eswatini Electricity Company (EEC), a private entity. Also, other enterprises noted were the Royal Eswatini National Airways (which formed a jointventure with South African Airways to form Swaziland Airlink) and the commercial arm of the Eswatini Dairy Board – are partially privatised. However, it was noted that the number of SOEs in Eswatini were huge and this raised concerns about their sustainability.