Parastatals 101
By: Ndumba J KamwanyahMINISTER Erkki Nghimtina advocates tough love. The Weekender’s Rambler thinks that some of them operate like ghomtjas.
The Namibian writes that it’s a lost opportunity because the money spent on them is not being put to best alternative use. The SPYL’s (Swapo Party Youth League) young Turk, Job Amupanda, says it is about time that they are run by young professionals. And the columnist Alexactus T Kaure calls them ‘Frankenstein monsters’ that are hunting down and making demands on the Namibian public spending. Namibia’s state-owned enterprises (SOEs) – also called parastatals – what are they? Are they good public policy? And how should public policy evaluate their successes and failures?
Parastatals are not necessarily new public policy initiatives that started in post-independence Namibia. Colonial Namibia had them, but white Namibians dominated their decision-making structures. You may call it Namibianisation because a lot about them have changed since independence. New ones have been created. Some have been renamed and their structures revamped. Their boards also have transformed remarkably - but in reverse form - because they are now mostly dominated by black faces … previously disadvantaged Namibians (or black elites as it was made clear to me recently).
Granted, as a measure of how far we have come - Agribank, NamPower, Telecom, Namibia Wildlife Resorts, Air Namibia, TransNamib, NamPost, NamWater, NBC – are perhaps symbols of post-independence Namibian pride and success. However, in spite of their unique importance to the Namibian economy, some parastatals also seem to be creating a fiscal burden for Namibia in terms of inefficiency, budgetary losses, and provision of poor products and services.
So there is a good reason why there is widening discontent with the government’s failing business companies. Just like there is a market failure and government failure, we may as well call it ‘parastatal failure’.
Of course, Namibia’s business companies have to be dealt with and evaluated on a case-by-case basis. However, theoretically, we have to think of them in this way: Our society primarily allocates resources through the private market (which is a laissez-faire approach in which the government supposed not to interfere with individual choice) or by means of a collective choice through government institutions and structures. From this perspective, market failure justifies the rationale for government intervention in the private market to correct the perceived failure. Likewise, government failure justifies the reverse…which is government non-interference in the private market. The former apparently occurs voluntarily through Adam Smith’s “invisible hand,” which believed to allocate resources efficiently through the utility-maximising behaviour of consumers and the profit-maximising behaviour of private business. The latter is political. This is because, all things considered, the private economy is not perfect and does not always result in a fair deal or in efficient allocation of resources, thus justifying public policy intervention in order to improve the situation in accordance with the values of a good society.
For starters, there is no coherent theory of government failure, but problems relating to voting, representative democracy, and the problem of implementing collective decisions, are viewed as some of the circumstances under which government may be deemed not to provide or allocate resources in accordance with democratic ideals. And market failure, on the other hand, usually occurs due to violations of the public good principle, negative externalities, natural monopolies and information asymmetries.
Within this context parastatals are designed as middle of the road institutions/service providers with the understanding that they will balance the competing societal goals of providing service or allocating a resource through private choice (which is seen as efficiency-driven) and collective choice (which are the values of a good society including equity, fairness, participation and so forth). In other words, they are created to provide services that are not provided by the private sector due to the market failure, but also cannot be publicly provided due to government inefficiency. Please note that efficiency is not the only objective behind any parastatal, nor is profit-making. The opposite is also true that some parastatals have social missions or objectives.
It is against the backdrop of the parastatals’ nature of being government-funded but privately provided that an argument against too much government interference in their corporate governance structures - the type of Nghimtina’s ‘enough is enough’ dictum - can be made. This is so because the Namibian government exerts control over the SOEs, funds them, and appoints their directors and CEOs. But the flipside is also true. It appears to me that less government (through the inaction of responsible ministers and boards) in terms of stewardship to ensure transparency and accountability in some of the parastatals is the main problem here.
Now here is the difficult part: Is it time for Namibia to let go of some of its failing SOEs, and instead let the private market take over? I would say it is time to streamline, restructure their boards, hire competent CEOs and managers, and improve their transparency. The social implications of letting the private market take over are huge.
* Ndumba J Kamwanyah is a public policy consultant and an Africa blogger for the Foreign Policy Association. ndumba.kamwanyah@umb.edu; Twitter@ndumbakamwanyah