Govt to get tough on parastatals

THE Ministry of Finance plans to exercise tighter control on how and with whom State-Owned Enterprises (SOEs or parastatals) invest public funds.

SOEs can also no longer expect to receive huge allocations from the treasury while they have millions of dollars tied up in often dubious investments, Finance Minister Saara Kuugongelwa-Amadhila has warned. Government would like to see public funds only invested within the boundaries of Southern Africa, in secure instruments, even if their return rates are lower than more risky ventures, and preferably only within the banking sector.”The motivation should not be just to grow these funds.The motivation should be to have these funds secured, even if the return rates are not so high,” said Kuugongelwa-Amadhila, noting that the recent spate of bad investments made with public money appeared to have been invested in risky “fly-by-night” ventures by officials with little expertise in making investments.Yesterday, the Namibia Financial Institutions Supervisory Authority (Namfisa) called together representatives from SOEs, including Regional Councils and local authorities, in Windhoek to discuss in particular their handling and investment of public funds.Namfisa General Manager for Investment Institutions Boni Paulino said the forum was convened in the light of ongoing media reports on the misuse of public funds.Kuugongelwa-Amadhila told those present that her Ministry would in future expect them to submit a written policy spelling out its investment procedure, as well as where and under what terms public funds are being invested.The SOE governing council, which will be established by a law to be tabled in Parliament this week, will play a pivotal role in monitoring the way in which public funds are being used, Kuugongelwa-Amadhila said.In obvious reference to the Offshore Development Company (ODC) debacle, to which sister corporation the Namibia Development Corporation (NDC) gave N$55 million to be invested on its behalf, Kuugongelwa-Amadhila said it was “incomprehensible” that SOEs invested with a party that didn’t have the fixed assets to cover the amount invested.She said Cabinet had placed a moratorium on Government standing guarantees for investments of this nature and, according to its debt-management policy, would only do so depending on the viability of the proposal.Further, Government would no longer be throwing money after parastatals that made bad investments, had high operational costs and were unable to offer the state any dividends as a result.”These parastatals who ask money from the treasury and then we find out they have N$20-30 million invested in insurance policies…Government is highly concerned about this,” said Kuugongelwa-Amadhila.Her Ministry would go as far as ordering parastatals to cancel investments if the procedure was not handled above board, Kuugongelwa-Amadhila said.”You can’t continue to be extravagant and expect money from the State,” she said, telling SOEs that Government was considering a dividend policy to determine what should be paid to the State.No longer would the Finance Ministry accept companies making millions of dollars in profit, stashing much of it away offshore and only offering Government meagre dividends on an ad hoc basis.”I’m not saying we want to decapitalise the institution, but just saying all of us should contribute to service delivery,” she said.In future, the Finance Ministry would expect SOEs to submit their business plans and will allocate money based on planned activities.She encouraged Namfisa to clamp down on so-called “brokers”, whom the Minister said were bringing the industry into disrepute and duping Government officials to “invest”.”If they break the law, they must be barred from operating in the market,” said Kuugongelwa-Amadhila.”We are not very comfortable with asset managers who have enticed you to make investments that turn out not to be very good”.As the body expected to regulate financial institutions outside the banking sector, Paulino acknowledged Namfisa’s shortcomings for focusing most of its attention on whether pension funds, asset managers and insurers were actually complying with the law.”We need to move away from focusing on compliance-based to risk-based activities,” said Paulino.He said in future Namfisa would also concentrate more on how institutions are marketing their products, given that marketing misconduct was commonplace and targeted consumers who did not appear very educated on investment matters.Government would like to see public funds only invested within the boundaries of Southern Africa, in secure instruments, even if their return rates are lower than more risky ventures, and preferably only within the banking sector.”The motivation should not be just to grow these funds.The motivation should be to have these funds secured, even if the return rates are not so high,” said Kuugongelwa-Amadhila, noting that the recent spate of bad investments made with public money appeared to have been invested in risky “fly-by-night” ventures by officials with little expertise in making investments.Yesterday, the Namibia Financial Institutions Supervisory Authority (Namfisa) called together representatives from SOEs, including Regional Councils and local authorities, in Windhoek to discuss in particular their handling and investment of public funds.Namfisa General Manager for Investment Institutions Boni Paulino said the forum was convened in the light of ongoing media reports on the misuse of public funds.Kuugongelwa-Amadhila told those present that her Ministry would in future expect them to submit a written policy spelling out its investment procedure, as well as where and under what terms public funds are being invested.The SOE governing council, which will be established by a law to be tabled in Parliament this week, will play a pivotal role in monitoring the way in which public funds are being used, Kuugongelwa-Amadhila said.In obvious reference to the Offshore Development Company (ODC) debacle, to which sister corporation the Namibia Development Corporation (NDC) gave N$55 million to be invested on its behalf, Kuugongelwa-Amadhila said it was “incomprehensible” that SOEs invested with a party that didn’t have the fixed assets to cover the amount invested.She said Cabinet had placed a moratorium on Government standing guarantees for investments of this nature and, according to its debt-management policy, would only do so depending on the viability of the proposal.Further, Government would no longer be throwing money after parastatals that made bad investments, had high operational costs and were unable to offer the state any dividends as a result.”These parastatals who ask money from the treasury and then we find out they have N$20-30 million invested in insurance policies…Government is highly concerned about this,” said Kuugongelwa-Amadhila.Her Ministry would go as far as ordering parastatals to cancel investments if the procedure was not handled above board, Kuugongelwa-Amadhila said.”You can’t continue to be extravagant and expect money from the State,” she said, telling SOEs that Government was considering a dividend policy to determine what should be paid to the State.No longer would the Finance Ministry accept companies making millions of dollars in profit, stashing much of it away offshore and only offering Government meagre dividends on an ad hoc basis.”I’m not saying we want to decapitalise the institution, but just saying all of us should contribute to service delivery,” she said.In future, the Finance Ministry would expect SOEs to submit their business plans and will allocate money based on planned activities.She encouraged Namfisa to clamp down on so-called “brokers”, whom the Minister said were bringing the industry into disrepute and duping Government officials to “invest”.”If they break the law, they must be barred from operating in the market,” said Kuugongelwa-Amadhila.”We are not very comfortable with asset managers who have enticed you to make investments that turn out not to be very good”.As the body expected to regulate financial institutions outside the banking sector, Paulino acknowledged Namfisa’s shortcomings for focusing most of its attention on whether pension funds, asset managers and insurers were actually complying with the law.”We need to move away from focusing on compliance-based to risk-based activities,” said Paulino.He said in future Namfisa would also concentrate more on how institutions are marketing their products, given that marketing misconduct was commonplace and targeted consumers who did not appear very educated on investment matters.