Economic analysts are backing the policy proposal by Ernst & Young that would grant the minister of public enterprises the power to regulate salaries of top management cadres in state-owned enterprises.
Speaking to The Villager this week, Minister of Public Enterprises, Leon Jooste, said that he will table a motion to this effect in parliament next year.
“We are consulting public enterprises now and I will table it in cabinet next year, thereafter I will publish it in the Government Gazette making it available to the public,” he said.
The proposed legislation will also grant the minister authorising powers to judge and decide on whom deserves a bonus and how much it should be.
The policy was necessitated by the fact that the salaries of state-owned enterprises’ (SOEs) bosses are not regulated.
According to economist, Dr. Omu Kakujaha-Matundu the salaries of commercial SOE’s should be based on what income a particular parastatal generates and bonuses should be on clearly set financial and service delivery targets.
He added: “The Board (of Directors), in concurrence with the minister, should demote or fire a SOE executive for non-performance. The rot has been allowed to continue for too long under previous political administrations and it should stop. Taxpayers deserve better, our people deserve better and so the future generations too! SOE’s top management have been engaging in morally and financially wrong deeds by establishing their own salaries. Hence making the salaries of top management of SOE’s contingent on SOE’s performance will send a clear message that every executive should be paid within the means of the particular means of the particular SOE.”
Matundu explained that the disclosure of top management salaries of SOE’s can be considered as these institutions are operating with taxpayers’ money, and transparency and accountability is of immense importance.
“How can I be your employer but I don’t know how much you are been paid? How can I (taxpayer) allow my employees to determine their own wages? That is weird! Secondly, how can I allow you to pay yourself exorbitant salaries whether you have performed satisfactory or not? And pay yourself a fat bonus on top of that.”
The director at SME Compete Danny Meyer concurred with Matundu.
“An excellent development that communicates in the sternest way to all stakeholders, which include management and staff of state-owned enterprises, taxpayers and the general public that it is no longer going to be business as usual. In certain terms, corporate governance will indeed be beefed-up,” Meyer said of the move to curb unregulated increases on salaries of parastatals’ bosses.
He added: “As it pertains to performance of individuals holding a leadership post at a SOE it reaffirms that they are under contract to perform and if they fail to do so they run the risk of getting the chop. In real life that is how it works - shape-up or ship out.”
Economist Henning Melber, however, said that the safest way for a performance boost is always to have a highly professional, skilled and dedicated management in the entity itself.
“You need internal leadership, which motivates and sets examples. If this is not the case, the body is rotting from the top. If you delegate to line ministries the authority to punish or reward SOE management for non-performance, you do not really ensure fair assessments. This does not eliminate favouritism and nepotism, but only pretends to introduce more control and quality assessment,” Melber asserted.
According to Melber what is required is a total makeover of the public and civil service, which eradicates ‘jobs for comrades’ as the guiding principle and introduces the ethics of serving in the interest of the people.
“There is a long way to go. While State House has occasionally said the right things, action speaks louder than words. And there is little evidence so far that those holding responsible positions are indeed walking the talk,” he said.
Melber added: “SOE’s which make losses in sectors not of essential need for the ordinary people should be closed and left to the private sector to decide if this is worthwhile business such as an airline or media, for example. Taxpayer’s money should be spent only on the provision of basic services, not on small diverse empires, which mainly serve the interest of those employed at high costs at the expense of the citizens. Most of the SOE’s currently existing seem to exist mainly to generate additional rents for the privileged, instead of adding value to the running of matters in the interest of the citizens.”
Melber decried the fact that the recruitment of top level staff or the promotion of those seeking a career inside of the SOE still depends to some extent on those making the decisions.
“As long as these decisions are not based on clear, transparent and verifiable criteria but relate to personal connections and preferential treatment, nothing is gained,” he said.
Matundu, meanwhile, stressed that “no one is saying top management of SOE’s should receive starvation wages. What we are saying is that their salaries are out of sync with the income generated and/or services delivered by the SOE’s. Talking of morality, transparency and been paid in line with the particular SOE’s performance will attract honest and morally upright executives who have the interest of up holding their good name, the interest of the nation and its people at heart. Rather than the current situation where there is a scramble for those top jobs just because of the lucrative packages – it will also avoid the political lobbying by the well-connected as they fight to get the jobs so as to milk the system.”
He said that there are many factors that affect performance, but paying market related salaries based on performance is one way to improve service delivery.
“When government demonstrates that SOE’s is serious business and not a joke, it will attract executives who are keen to make a difference. That will eliminate people competing for and accepting position for which they are not qualified. It will also prevent politicians from campaigning for their preferred candidates, whether they qualify or not. SOE’s can make a difference in the lives of our people and I think we should set self-interest aside and serve our people. Of course, bonuses should be performance-based. But there should be a transparent reward and punishment system. There should be consequences for non-performance. Receive a bonus/award when you perform, receive no bonus in a particular year when the SOE is struggling for financial and economic reasons and get a sack for dismal results due to your incompetence,” he stated.
Meyer noted that performance motivated and success driven individuals will know that it is required of them to make their salaries public as it will be well articulated and professionally documented.
“So they will know what is expected of them and then apply for the position with open eyes. For freeloaders it send out a signals that ‘don’t bother to apply if you are not up to the challenge’. Quite frankly it is the only way to achieve desired results and sustainability in the long run. Enhanced corporate governance also positions the business oriented SOE’s for commercialization and potential listing on the Namibian Stock Exchange (NSX),” the economist said.
Meyer also warned against undue interference in the running of parastatals.
“Concerning the board of directors of SOE’s and other management echelons, corporate governance is all embracing and cannot be selectively applied. In other words it is everything or nothing. Mechanisms should be put in place that precludes interference and allow the directors, CEOs, management and staff to get on with the job unhampered by external interference and unnecessary bureaucracy,” he said.