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MBABANE – The performance of a number of public enterprises which ESEPARC recommended institutional reforms, merging or abolishment, has gone from bad to worse.

As a result, government’s expectation of getting dividends or relief from forking out subventions for the parastatals might remain just a dream. ESEPARC is an acronym for the Eswatini Economic Policy Analysis and Research Centre (ESEPARC), the entity that conducted an analysis of the performance of the country’s SOEs way back in 2021 and recommended that some should be merged, restructured or abolished. One of the ESEPARC recommendations was that government should complete and close out parastatals implementing projects that have run their course.

Currently, there are 50 State-owned enterprises (SOEs) and according to the ESEPARC report, Eswatini’s parastatals are now a huge burden on the economy and on the fiscus, with transfers to Category A  parastatals being about E2.4 billion in 2020/21. While the implementation of the recommendations is yet to be fully implemented, the performance of the parastatals continues to be poor and this is reflected in the Auditor General Timothy Simelane’s Financial Audit Report for the financial year ended March 31, 2023, which was tabled by Minister of Finance Neal Rijkenberg, when presenting the budget speech last month.

poor performers

In the AG’s report, the parastatals have been listed as poor performers based on the fact that they have continued to survive on government subvention. Among them is the University of Eswatini (UNESWA) which ESEPARC recommended needed to be restructured and have its administration leaned out. ESEPARC had also recommended that the institution needed to rationalise programmes or courses it offered in order to ascertain if they aligned with the needs of the economy. Also in the list of poor performing SOEs according to the AG is Small Enterprise Development Company (SEDCO), which ESEPARC recommended should have its functions consolidated with the Eswatini Development Finance Corporation (FINCORP).
Another entity on the list is the Sebenta National Institute (SNI), which ESEPARC had stated was a project meant to improve adult literacy.

ESEPARC had recommended that government should complete the activities of the SNI with the current cohort at the time, and close the project once the group graduated. The Eswatini National Industrial Development Corporation (ENIDC) has not been left of the list of poor performers as assessed by the AG. In the ESEPARC report, it had been recommended that government should finalise any outstanding investments and dissolve the ENIDC. The Eswatini Post and Telecommunications Corporation (EPTC), another parastatal has been listed under poor performers. Other parastatals which made it to the list of under performers in the AG’s report include the Eswatini National trust Commission (ENTC), Eswatini Television Authority (ESTVA), the Royal Science and Technology Park (RSTP) and the Eswatini Environmental Authority (EEA). In his report, the AG highlighted that he notified the controlling officer (principal secretary) in the Ministry of Finance, that an analysis of the financial performance of the aforementioned public enterprises over a period of five years, financial years 2019 to 2023, revealed that some of them had continually been incurring significant losses as shown in the table.

turnaround strategies

“The expectation is that well managed public enterprises should at least be able to break-even (make adequate income to cater for all operating expenses) and further be able to develop and effectively implement turnaround strategies that would improve their financial performance and financial position,” reads part of the AG’s report. The AG made reference to the Public Enterprise and Monitoring Act of 1989, as amended, which stipulates that the Public Enterprise Unit should, in consultation with the standing committee and governing body, monitor and review the financial affairs and budgets of each public enterprise. This, the AG said, has to be done with the view of bringing to the attention of the standing committee the impending problems of the public enterprises.

public enterprises

Matsebula said he warned the controlling officer that monitoring and evaluation of the public enterprises was not effective. “Government may eventually be required to bailout the public enterprises, thereby increasing public spending and plunging government to excessive deficits. The public enterprises may not be able to efficiently and effectively execute their mandates, thereby negatively impacting service delivery and consequently the lives of citizens,” Matsebula said in his report. Also, he said he advised the controlling officer to, through the PEU, regularly monitor and evaluate the performance of the public enterprises and ensure that policies and strategies are put in place to improve their financial performance and that where viability cannot be achieved, necessary decisions that are in the interest of the citizens should be taken.

The AG said the response he received from the controlling officer was that the PEU office fully executed its function and reported to SCOPE on a quarterly basis on their performances and challenges these entities were currently facing. “The controlling officer stated that the queried companies are facing serious financial challenges and has noted from the budgets of the subverted entities that most the cost are tied up in the wage bill, as it ranges around 85 per cent of the subventions, leaving a small amount for operational costs and are also accumulating quite a lot of liabilities and tend to use bank overdraft facilities to cater for their critical and operational cost,” said Matsebula. Meanwhile, the AG spoke strongly about what he termed non-monitoring of the performance of the public enterprises, which to some, not paying dividends despite that they made profits.

dividend policy

He said he notified the controlling officer through a report referenced A2/2022/2023/28, dated January 31, 2024, that the ministry was not adequately monitoring, managing and engaging line ministries of the parastatals and their related Boards of directors to ensure that they declared and remitted appropriate amounts of dividends on their after tax profits, as per the dividend policy. He said accordingly, the companies were expected to declare and remit dividends in the range of E47 729.95 to E93 424 518 of their annual after tax profits. Matsebula said government has controlling interest in Category A public enterprise, with shareholding ranging from 75 to 100 per cent and, therefore, had a strong bargaining power to influence decisions on profit distribution.

financial sustainability

He said through the PEU, the ministry was expected to execute an oversight role to ensure financial sustainability and declaration of dividends on after tax profits earned and returns from reinvestment initiatives to government. “The controlling interest grants the government the authority for active involvement and engagement, authorisation and approval of the Board’s decisions and recommendations. “The issue of dividend declaration was not included in the notes to the financial statement of the parastatals, which implies that the decision not to declare was not approved by the minister for Finance, but was rather the sole discretion of the Boards,” the AG said. He further noted that the Eswatini Electricity Company (EEC), Eswatini Savings and Development Bank, FINCORP, Eswatini Investment Development Company (EIDC), Eswatini Railway were the only ones remitting dividends.

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