Ghana’s state-owned enterprises (SOEs) have suffered cumulative losses of GHS 5.3 billion in 2021 due to mismanagement, corruption, and inefficiencies. To make them profitable, a comprehensive reform is essential, focusing on professional leadership, operational efficiency, financial accountability, private sector models, strategic public-private partnerships, and enhancing governance and technology. Embracing these changes will ensure SOEs contribute positively to the economy.
Ghana’s state-owned enterprises (SOEs) have significantly mismanaged resources, reporting a cumulative loss of GHS 5.3 billion in 2021 according to the 2022 State Ownership Report from the Ministry of Finance. Major SOEs, including the Ghana Cocoa Board (COCOBOD) and the Electricity Company of Ghana (ECG), have faced severe deficits due to mismanagement and corrupt practices. This situation illustrates that SOEs should be treated as national assets aimed at driving economic prosperity rather than as burdens upon the state.
To transform Ghana’s SOEs into profitable entities, a comprehensive approach is required. First, leadership must be professionalized rather than politicized, ensuring that leaders are selected based on merit and experience rather than political ties. The success of Singapore’s Temasek Holdings serves as an example where experienced business executives have led to favorable outcomes. This merits the implementation of strict selection criteria for SOE leadership to focus on competence.
Furthermore, it is essential to eliminate bureaucratic inefficiencies that worsen profitability. Currently, payroll expenses account for a substantial portion of some SOEs’ expenditures, detracting from operational effectiveness. The case of Ghana Post exemplifies the inefficiencies present, advocating for a restructuring in workforce size and adoption of automated processes for enhanced productivity. Ethiopia’s Ethiopian Airlines showcases how keeping operations lean can achieve profitability.
A system for holding SOE leadership accountable for financial performance must be established. Regular publication of audited financial statements, akin to Rwanda’s performance contracting for SOE managers, can enforce accountability. Such accountability correlates with an obligation for leadership to meet specific financial targets.
The government should adopt private sector business models within SOEs, treating them as enterprises focused on profitability. Clear revenue targets, diversification of income sources, and improved pricing strategies are imperative. For example, ECG could explore novel debt recovery methods rather than depend heavily on tariff hikes while learning from China’s CNPC for balanced operational efficiency and profitability in public services.
Encouraging strategic public-private partnerships (PPPs) can also rejuvenate SOEs by attracting vital capital and expertise. The Lekki Deep Sea Port project in Nigeria exemplifies a successful PPP that has bolstered modernization while lessening governmental financial strains. Ghana should similarly cultivate such partnerships across sectors like energy and transportation, where operational inefficiencies hinder profitability.
Moreover, the reduction of political interference is crucial for SOE autonomy and long-term profitability. Establishing effective governance structures can prevent political manipulation, as seen in Brazil’s Petrobras, which succeeded after minimizing political involvement in operations. Ghana should implement reforms with a focus on enhancing corporate governance.
Lastly, adopting technology to modernize SOE operations can vastly improve efficiency and customer service. The Kenyan M-Pesa initiative illustrates how technology can enhance revenue collection, and similar tech solutions should be embedded into Ghana’s SOEs for better operational outcomes.
To ensure the profitable operation of Ghana’s SOEs, a paradigm shift in management, accountability, governance, and operations is critical. The experience from various global models emphasizes the importance of professional leadership, efficiency, political independence, and the adoption of technology. By leveraging public-private partnerships and reinforcing a results-oriented approach, Ghana’s SOEs can transition from loss-makers to significant contributors to national revenue. The call for reform is urgent, with the aim of shaping SOEs that truly serve the public interest.
Original Source: www.ghanaweb.com
