Demands to establish wage limits in state-owned enterprises intensify
Revamped Take:
The long-awaited Domestic Debt Exchange Programme (DDEP) has revived a chorus of voices advocating reforms, particularly capping executive compensation at State-Owned Enterprises (SOEs).
The DDEP emerges amidst a severe debt burden and meager revenue inflows. Traditionally, SOEs are expected to generate profits and distribute dividends to the government. Regrettably, they've transformed into money pits, consuming billions of taxpayer dollars without delivering substantial returns - a state of affairs that economists attribute to the current rigid fiscal situation.
By year-end 2020, the government's exposure to SOEs totaled GH¢21.53 billion, as outlined in the State Ownership Report published by the State Interests and Governance Authority (SIGA). The report broke down exposure into GH¢1.48 billion in subsidies, GH¢14.74 billion in re-lent loans, GH¢2.38 billion in outstanding government-backed guarantees, and GH¢138.99 million in liabilities from ongoing Public-Private Partnership (PPP) projects. Additionally, there was GH¢2.79 billion in support and bailouts to certain SOEs to mitigate the economic fallout caused by the COVID-19 pandemic.
In a commentary about the role of SOEs in national economic recovery, Dr. Ernest Addison, the BoG Governor, emphasized the importance of efficient and competitive SOEs. He also highlighted the need for a policy that outlines objectives, guiding principles, roles, responsibilities, fiscal relations, and remuneration capping for SOEs.
"All of these issues were discussed under the IMF programme," Dr. Addison underscored. Moreover, an Africa Centre for Energy Policy (ACEP) report unveiled losses of GH¢3.7 billion, GH¢2.9 billion, and GH¢2.5 billion in the energy sector SOEs in 2018, 2019, and 2020, respectively.
Yet, despite assurances of SOE listings on the Ghana Stock Exchange - supposedly paving the way for fresh funding and fostering better governance practices - state entities continue to falter, particularly in the realm of governance. As per the Minister for Public Enterprises Joseph Cudjoe, around 60% of the 128 state agencies failed to submit audited reports by the end of 2022. This underperformance persists amidst concerns over vague key performance indicators and the lack of consequences for poor performance.
Enrichment Insights:
- Governance Reforms: In 2023, new guidelines focused on clarifying state commercial expectations, setting a cap on remuneration, enforcing dividend policies, and improving transparency were approved[1].
- SIGA Act and Ownership Policy: These reforms aim to remedy governance deficiencies, political and institutional weaknesses, and structural financial imbalances within SOEs[1].
- Financial Performance Enhancements: Efforts are underway to promote financial discipline and accountability in SOEs, reducing their reliance on state subsidies and improving their overall financial health[1].
- Digital Compliance Tools and Tax Reforms: Ghana's broader fiscal reforms have led to increased domestic revenue, benefiting SOEs by creating a more stable economic environment[2].
- Broader Economic Reforms: Government policies are designed to promote financial inclusion, prepare the workforce for the digital age, and expand economic productivity beyond traditional working hours - indirectly supporting the efficiency and competitiveness of SOEs[5].
- To facilitate better governance practices and improve financial performance, a new policy, focusing on clarifying state commercial expectations, setting a cap on remuneration, enforcing dividend policies, and increasing transparency, has been approved for State-Owned Enterprises (SOEs).
- The Sigmificant SIGA Act and Ownership Policy reform aim to address governance deficiencies, political and institutional weaknesses, and structural financial imbalances within the SOE industry.
- As part of the broader financial performance enhancements for SOEs, efforts are underway to promote financial discipline and accountability, reducing their reliance on government subsidies and improving overall financial health, while digital compliance tools and tax reforms contribute to creating a more stable economic environment that benefits SOEs.
