MPs decry loss making state firms, call for PPP

By Augusta Njoji , The Guardian
Published at 06:00 AM Oct 31 2024
Financial Loss Illustration
Photo: File
Financial Loss Illustration

A SECTION of legislators has voiced dissatisfaction with the performance of a wide range of public institutions that heavily rely on government subsidies, occasioning significant budgetary imbalances.

The 2022/23 report of the Controller and Auditor General (CAG) indicated that paratatals’  dependency on state funding increased from 13.2bn/- to 17.4bn/-during the financial year in question.

One line of argument was that the government needs to consider liquidating, restructuring or seeking partnerships with the private sector (PPP), issues arising from discussions on reports from the Public Accounts Committee (PAC) and the Local Authorities Accounts Committee (LAAC).

Deodatus Mwanyika (Njombe Urban) pointed out that among the 35 leading commercial organisations, 17 were regularly lined up for government subsidies,  stressing that this highlights the urgent need for reform and the privatisation of certain institutions. 

“Business operations have their processes, and a key aspect is ensuring capital is returned and operations are efficient,” he explained, elaborating that while the government has set criteria that large public institutions contribute at least 15percent of their gross revenueo to the public coffers, numerous organisations don’t meet this requirement.

“Even those that have made contributions show a decline in dividends from the revenues of organisations that have historically paid dividends,” he stated, expressing surprise at the existence of around 248 organisations.

It is doubtfulo that the government ever established such a large number of public firms, he said, asserting that while some service-providing organisations may be tolerated, “those engaged in business must compete, return capital and distribute dividends.”

He cited the case of state firms operating at a loss for over three consecutive years, affirming that in commercial terms, companies that consistently incur losses are close to bankrupt and need not deplete public resources much further.

Some organisations have properties classified as fixed assets but this does not resolve operating capital difficulties, he said, urging the government to consider closing, liquidating, or finding partners for these entities.

Highlighting the importance of recognising the roles of boards of directors, he said that these positions should not simply be filled by retired individuals.

“Boards are not places for appointing retired people, though not all retirees are unsuitable. These roles are critical for managing companies, and we must approach this matter with care,” he emphasised.

Nominated MP Shamsi Vuai Nahodha, a former Zanzibar chief minister, proposed six measures for curbing mismanagement of public funds, detailing criteria for appointing board members and chief executives of public organisations.

The appointment process should consider qualifications, skills, expertise, experience and character, he said, reminding the legislature that CEOs of public organisations should be selected from key criteriao like conduct, competence, experience, education and attitudes.

He urged the government to send chief executives abroad for training, particularly in large financial institutions, to learn effective management practices.

The government needs to strengthen its organisational performance assessmrnt systems to expedite implementation of directives for improving government financial flow systems to combat fraud, he said.

Joseph Tadayo (Mwanga), asserted that public organisations must operate like private entities to achieve effective performance, but many boards of directos lack the necessary expertise.

The sectors they oversee cannot deliver the results the public desires, he said, citing complaints about government interference. ‘A capable board will not tolerate such intrusion; they should resign if they feel the government is overstepping,” he staed.

Boards must recognise their role in driving profitability and ensure that organisations implement projects that generate profits, he added.