State-owned enterprises post GH₵ 586.4million losses in 2019

The value of Ghana’s 126 State-Owned Enterprises (SOEs) is GH₵110 billion, representing approximately 27% of the country’s 2020 Gross Domestic Product (GDP).

Prudent management to generate 10% return on the assets can generate GH₵11 billion to the national coffers and the enterprises, resulting in the employment of more than 700,000 people in the public and civil service.

GH₵586.4m loss recorded in 2019

As of the end of 2019, an aggregate net loss of GH₵586.4 million was recorded in the SOEs sector, and this compares to a loss position of GH₵188 million in 2018.

Negative operating margins, averaging around 10% posted between 2015 and 2019

Indeed, between 2015 and 2019, SOEs have consistently posted negative operating margins, averaging around 10%.

Operating expenses rising than revenues

This means that, generally, operating expenses at state enterprises are rising more than revenues coming in, a situation that does not paint a good picture.

Joint Venture Capitals doing better

Interestingly, Joint Venture Capitals (JVCs) involving SOEs tend to do well and post profits while 100% SOEs post losses.

2021 Performance Contract agreement signing

Finance Minister Ken Ofori-Atta announced these at the signing ceremony of the 2021 Performance Contract agreement between the State Interests and Governance Authority (SIGA) and 71 State-Owned Enterprises (SOEs), Joint Venture Capitals (JVCs), and other state entities in Accra.

The performance contract, an initiative of SIGA, aims to evaluate and assess the performance of the CEOs.

71 Specified entities signed Performance Contracts

Heads of 71 specified entities who have successfully negotiated their contracts for 2021 signed onto the agreement, as a measure to ensure good corporate governance and an efficient and profitable running of their entities.

47 SOEs never submitted annual financial statements for 5 years

Another shocking revelation was that 47 SOEs have not submitted their annual financial statements to the Finance Ministry in the past five years.

The institutions have since 2016 failed to submit their annual financial statements in flagrant contravention of the Public Financial Management Act.

Only 14 out of the 126 SOEs submitted annual statements in 2019

Indeed, more staggering is the revelation that only 14 out of the 126 SOEs operating in the country responded to the ministry's directive to submit their annual statements in 2019.

Managing entities prudently

Ofori-Atta noted that the revelations highlight the need for a renewed performance contract saying it was in the national interest of Ghanaians to ensure that the entities were managed prudently.

Need to improve public service outcomes

The Finance Minister said there was the need for the government to improve public service outcomes while achieving the requisite fiscal consolidation to help the economy grow.

Vision of profitable and vibrant SOEs

He said the Ministry of Finance and the Ministry of Public Enterprises remained committed to partnering with SIGA to achieve the President’s vision for the state enterprises that were profitable and vibrant.

He encouraged the chief executive officers (CEOs) and director-generals (DGs) of the SOEs to hold themselves to higher standards of excellence, financial discipline, and accountability.

President Akufo-Addo calls for improved financial performance

The guest of honour, President Nana Addo Dankwa Akufo-Addo, entreated SOEs to adopt strategies to improve their financial performance.

Jobs and wealth

This, he said, would enable those entities to contribute effectively to the national development agenda and also generate jobs and wealth for the people.

Adoption of best corporate governance practices

The President urged the managers to adopt best corporate governance practices, to make them achieve their objectives for the year.

Need to achieve the targets

He placed emphasis on the need for the SOEs to achieve the targets under the performance agreement to feed into the agenda to make Ghana a country beyond aid.

The President charged the SOEs, SIGA and the ministries to work as a team for sustained progress and development.

Joseph Cudjoe worried about high indebtedness and loss-making

Mr Joseph Cudjoe, the Minister of Public Enterprises, said, “Today, most of our State-Owned Enterprises, which have been set up for commercial purposes, are largely characterised by high indebtedness and loss-making operations,” but “working collaboratively with the various sector ministers and using the Annual Performance Contracts as an effective tool, we can put a handle on these problems to solve them.”

SIGA Act needs Legislative Instrument

He said there was the need to put in place a Legislative Instrument (LI) for the operationalisation of the SIGA Act.

Asamoah-Boateng says lot has been achieved

Mr Stephen Asamoah-Boateng, Director-General, SIGA, said efforts to actualise the SIGA Act had not been very smooth, saying from last year a lot had been achieved, especially judging by the number of state entities now taking part in the performance contract signing agreement.

He said most of the sector ministers had been very supportive and that a total of 71 state entities took part in the 2021 performance contract signing.

World Bank Country Director pledges support

World Bank Country Director in Ghana, Mr Pierre Laporte, reiterated the bank’s support to the reform agenda of Ghana’s public enterprises.

He said the bank was currently in discussions with relevant stakeholders for a potential programme-for-results to be submitted for approval next year, adding that the programme, among many other important Public Financial Management (PFM) issues, aimed at supporting the State-Owned Enterprises (SOEs) sector.

He said: “We are exploring different activities to be taken and expect key results in areas such as SOE performance evaluation reports, State Ownership Reports, and control on net transfers to SOEs.”

He said the World Bank was also preparing another programme-for-results in the energy sector, which would focus on key areas such as improvement of Electricity Company of Ghana (ECG) performance and corporate governance.

He said the COVID-19 pandemic had changed lives, saying “it has been affecting billions of people across the world for the last year and a half.”

Mr Laporte said he had the utmost respect for the leaders and employees of SOEs which had managed to and continue to successfully deliver critical services in key economic sectors in the Ghanaian economy such as energy, transport, and health during “these difficult times”.

He noted that without them the battle against the virus would have been more difficult.

He said he was pleased to see that in the 2021 budget the government had made a commitment to gradual medium-term fiscal adjustment that would see a decline in public debt starting in 2024.

He said under such circumstances, performances of SOEs need to be enhanced now more than ever to stop the need for the government’s regular interventions and financial support, and in turn protect the government’s ownership interests.

Mr Laporte welcomed the preparation of the State Ownership Policy, which highlighted the government’s commitment to achieving public policy objectives and goals while acknowledging the profitability requirement as fundamental.

He intimated that SIGA, since its establishment, had been a key institution in overseeing the state’s interests in specified entities and ensuring shareholder value, financial sustainability, and good corporate governance.

Mr Laporte said the project allocated $5.25 million for improving the governance of SOEs, through which the establishment of SIGA was supported.

He said in addition to the establishment of SIGA, the project had supported the consolidation of the state’s ownership role through an equity study and was supporting the corporate governance improvements.

He lauded the government and SIGA, in particular, for recognising the World Bank as an important partner in the endeavour to streamline the operations of public enterprises and ensure efficient delivery on their mandates.