State-Owned Enterprises (SOEs) have played significant roles in every economy. They employ many people and are a source of revenue for the government. Besides, they provide vital services that require huge capital outlays, which if left in the hands of the private individual, would not have been provided.
Many SOEs are mandated or sometimes influenced to fulfill certain public policy objectives and engage in quasi-fiscal activities that bear little relationship to their core commercial operations and for which the companies are not compensated from the budget.
Such quasi-fiscal activities include, for example, public service obligations that are below cost-recovery, price regulations that imply cross-subsidies, ancillary operations outside the public corporation’s core mandate, or excessive employment levels.
According to the 2018 State Ownership Report, the top two SOEs with the largest number of employees were the Electricity Company of Ghana (ECG) with 6,491 employees, and the Ghana Water Company Limited (GWCL) which also employed 4,809 people.
Despite employing a huge number of people, SOEs in the country has been characterized by high operations costs and declining profits over the years. SOEs are entities wholly owned and/or controlled by the government and so their failures can result in huge economic and fiscal costs.
The ministry of finance stated in the 2018 state ownership report that despite decades of aggressive privatizations, SOEs continue to account for a significant share of economic activity and the bulk of public sector assets and liabilities. It is estimated that SOEs and public corporations control more than 50 percent of the assets of the state.
Inefficient or poorly managed SOEs and public corporations tend to impose substantial economic and fiscal costs. The finance ministry further stated that loss-making SOEs and public corporations have and continue to be a persistent drag on public finances in the form of government guarantees, subsidies, loans, or capital injections.
When SOEs and public corporations go bankrupt, not only does GoG suffer an erosion of its initial investments in these entities but also assumes their liabilities, even where those liabilities are not explicitly guaranteed.
SOEs and public corporations contribute to the stock of government arrears and build up liabilities that exceed budgetary provisions.
In 2012, SOE arrears accounted for slightly more than 50 percent of government arrears, compared to 46 percent in 2010, concentrated largely in TOR, VRA, BOST, and utilities. In 2011, SOEs accounted for 11 percent of total government capital expenditure of nearly GH¢5 billion, concentrated largely in ECG, VRA, and GCAA. In 2002, the net exposure of ECG, VRA, and NEDCo was about US$204 million. This later rose to about US$1.1 billion at end of December 2015.
In the Communication Sector, entities with 100% Government of Ghana Shareholding that have made losses in 2018 are Ghana Broadcasting Corporation (GBC) with a net loss of GH¢9.06 Million, Ghana Post Company Limited (Ghana Post) with GH¢0.53 Million, Graphic Communications Group Limited (GCGL) with a loss of GH¢1.09 Million, and New Times Corporation (NTC) with GH¢ 1.25 Million.
The analysis on the energy sector shows that Bulk Oil Storage & Transport Company (BOST) made a loss of GH¢59.01Million in 2018, Electricity Company of Ghana (ECG) also made a loss of GH¢ 3,172.53 Million in the same year. Also, Ghana Grid Company Limited (GRIDCo), Tema Oil Refinery (TOR), and the Volta River Authority (VRA) made losses of GH¢ 114.29 Million, GH¢ 253.69 million, and GH¢ 862.13 Million respectively in 2018.
Other companies that made losses in 2018 include the Ghana Cylinder Manufacturing Company (GH¢1.77 million), Ghana Water Company (GH¢668.33 million), and Volta Aluminium Company (GH¢ 153.64). million.
It is clear from the above figures that the government needs to take drastic measures to rescue these enterprises majority of whom are on the verge of collapse.
Director-General of State Interest and Government Authority (SIGA), Mr. Stephen Asamoah-Boateng stated earlier this month that 18 SOEs will soon enlist on the Ghana Stock Exchange to allow Ghanaians to own shares in them and also monitor their operations.
This is one of the strategies the government is employing to improve efficiency in these SOEs.
But how long will this take?
“… as this report illustrates, financial and operational performance of the entities covered, particularly SOEs remain mixed and far from desirable. It is important to highlight the fact that these results, though somewhat disheartening, are not entirely unexpected. Indeed, the sheer scope and scale of the reforms being undertaken suggest that the pace of progress would be slow. But, we will succeed, if only we dare to persist”, said Finance Minister, Ken Ofori-Atta.
Although profit-making is not their sole aim, the finance ministry stated that “SOEs are commercial entities by nature” and just like any other entity, they need to cover their costs to stay in business. Operational inefficiencies in SOEs should therefore be a major worry to all because the state invests huge sums of money in these enterprises. Why are the private firms performing much better than the SOEs?
Reference can be made to the Holy Book which says to whom much is given, much is expected. But can the same be said about SOEs in Ghana?
