The fight over whether or not to kill the national railway company TransNamib and the Roads Contractor Company (RCC) has reached its crescendo.
Politicians continue the conversation on whether or not to first address the ambiguity or impracticality of implementing the private public partnership concept, which would see individuals acquiring stakes into the companies and co-manage it with government, the current sole shareholder of both loss-making entities.
The frequent question in the current discourse is whether PPPs would serve the intended purpose of lifting some weight off government’s burdened shoulders or create another enrichment scheme for a privileged few.
It has now come to light that public enterprises minister Leon Jooste has essentially placed on the table his ministry’s detailed plans to kill the two parastatals.
However, he seem to have hit a snag – as not all his fellow cabinet colleagues agree with his assessment of the two institutions, which is his reasons for intended closure of the two national institutions.
According to documents availed to New Era Weekend it is also clear that the Office of the President is siding with Cabinet members opposed to the idea of closing down TransNamib and RCC. In fact, the Office of the President is said to have asked that Jooste halt any plans to close RCC and only look at capacitating the institution.
In his motivation to close down RCC and privatise TransNamib, Jooste informed his fellow Cabinet peers of the analysis on the viability and importance, if any, of the two institutions. RCC’s strategic and business importance to the Namibian economy is described as a “marginal to none.”
“After careful consideration for the social, political and economic impact and weighing the rebuilding of the RCC versus the winding up [liquidation] of the RCC, we have come to the conclusion that the winding up of the RCC is the preferred option,” read part of the motivation letter.
The motivation letter accompanied a comprehensive business analysis that Jooste presented to his fellow Cabinet Committee of Treasury members, on 13 March. His team of technical advisors compiled the voluminous document, labelled ‘MPE [Ministry of Public Enterprises] position paper’.
“In the case of the RCC we have determined that the only way to continue with the RCC […] require a complete commercial overhaul or [to] rebuilt the company […] an entirely new business model transforming RCC from a subcontracting, joint venture company into an independent competitive contractor,” reads the document.
TransNamib was rated as of strategic importance but still is being motivated that it be completely overhauled through privatisation for it to continue operational.
“The main difference is that TransNamib has major strategic significance and the benefit of a proper functional TransNamib to the economic growth of our economy is unquestionably beneficial,” stated the document.
The document did not note that TransNamib’s salaries are more than half of its total expenditure or that often than not, the works and transport ministry has to dig in its own pocket to pay the monthly salaries of TransNamib staff.
The enterprise ministry says it is more concerned “over the current approach to the refurbishment and upgrade of the rail infrastructure which is a critical enabler for the transformation of TransNamib.”
“It will remain extremely difficult for TransNamib to deliver competitive, reliable bulk freight transport services considering the current state of the infrastructure,” said the document.
However, the future of the two institutions remain in balance, as even though the public enterprises ministry has proposed a two alternative approach to the fate of both institutions, it appears to disagree with the business plans, their costs and implementation, submitted by the two companies.
RCC is the State-Owned Enterprise to undertake work relating to the construction and maintenance of roads or any other construction works in accordance with sound and generally accepted business principles. It is currently involved in the construction of buildings, bridges, waterworks, dams, reservoirs, tunnels, canals, aqua ducts, irrigation works, harbours, aerodroms and railway infrastructure.
TransNamib is the railway State-owned enterprise organised as a holding company, to provide freight by rail and road as well as passenger services. It operates the country’s entire rail network.
New Era Weekend has earlier in March reported on the concerns that the implementation PPPs presented loopholes that would be exploited by savvy entrepreneurs.
Jooste did not respond to new questions sent to him. Yet in the documents the public enterprises ministry consultants shot down RCC’s business plan and the costing. RCC submitted a new business plan last year requesting N$300 million capital injection, along with the consideration to be fairly evaluated for public tenders, for it to turn itself around.
It has submitted that tenders – often inflated – are given to private sector and that some private companies use RCC to get public tenders, which RCC should and can get by itself.
Nevertheless the public enterprises ministry says RCC has never made a profit and billions of dollars of capital outflow has been the net result.
“The strategic business plan requests only N$300 million which is clearly not enough and will merely result in “buying more time” for [RCC]. The strategic business plan does not even illustrate how this amount was calculated,” the ministry says in its submission.
The private sector has earlier, in New Era Weekend’s March story, expressed concerns at why it takes long for government to respond to the business plans submitted by RCC and TransNamib, and address those concerns with the two parastatal boards, who are entrusted to run and manage the institutions.
Some executives also expressed concerns that PPP’s would also divert a portion of money from Treasury, as such PPPs are likely to benefit from a number of favourable concessions, under the guise of allowing private investors to recoup their costs and realise returns on their investment, before paying any dividends to the State.
They were also concerned that the purported ‘reforms to bring about efficiencies,’ and the waning SOEs off public finances to fund their operations, is nothing but a legal way to effectively replace such enterprises with private entities.
Entities would then carry on the mandates previously entrusted with phased public enterprises, at a higher cost to the Namibian consumers in the name of profit, it was argued. Some board members also spoke of how certain individuals are set to smile all the way to the bank once the PPPs legislation is being implemented.
Nevertheless finance minister Calle Schlettwein has argued, in his budget, that PPPs are the best way to finance infrastructure in the country, and thus reducing public enterprises’ overreliance on State unds for their operations. The PPP legislation that guide financing public private financing has already passed through the National Assembly and, Schlettwein told lawmakers, would prove to be “a means of infrastructure development and service delivery, without over-reliance on the national budget.”
In his defence, Schlettwein did also made it clear that along with the implementation of PPPs there shall be the reforms that would push for improved efficiency among public enterprises, so that at the end of the day they are delivering on their core mandates.
“Public enterprises must concentrate on meeting their core deliverable expectations. These reforms provide a framework on how best Namibia can leverage its state assets to optimise development outcomes,” he said.