SOEs to gulp more govt funds
Government will be pumping more funds into crippled parastatals such as Transnamib and the Roads Construction Company (RCC), in an attempt to save them, Prime Minister Saara Kuugongelwa-Amadhila has confirmed.
Kuugongelwa-Amadhila said this is part of the new turnaround strategies currently being formulated,
It was established earlier this year that the two parastatals will need a collective amount of approximately N$800 million to function properly after senior management at the paratatals begged for a government bailout.
Kuugongelwa-Amadhila said that the government will inject more funds into the struggling parastatals, which both play a significant role in the development of the country as a way to revive operations and turn them into self-sustaining entities.
“We are busy formulating the turn-around strategies for all SOEs which include Transnamib and RCC. Progress is still in its early stages but money will be injected into the strategies.
She however could not provide an exact amount as to how much exactly the parastatals will need adding that they are still in the process of estimating costs as they formulate the turn around strategies.
This comes two weeks after a combined Cabinet committee of trade and treasury recommended that the government injects over N$400 million as a short-term measure into Transnamib operations while a long-term turn-around strategy is being finalised.
Last year, TransNamib announced a 180-day turnaround strategy in September last year which once completed the parastatal said would generate a cash flow of more than N$12 million per month. The turnaround strategy which ended in March.
In January this year, TransNamib said the company will retrench about a 1 000 of its 1 600 employees.
The TransNamib Board of Directors this week launched an ambitious turnaround strategy that will cost the State up to N$400 million. The programme will be implemented in three phases over the span of three years.
The turnaround strategy will be initiated in the next six months to achieve amongst others; profitability within six months, the refurbishment of 12 General Electric locomotives, a planned upgrade of the railway line, and an operational restructure for employees.
The refurbishment of the locomotives is expected to cost N$60 million and has been identified as a priority area by the board. Should the board succeed, in excess of 50 locomotives will be operational. Currently TransNamib is hampered by a lack of locomotives, effectively leaving close to 10,000 tons of freight at the Port of Walvis Bay.
Meanwhile, the also troubled Roads Contractor Company also approached government of approximately N$ 400 million to over its operation costs while the committee on treasury chaired by the minister of finance Calle Schlettwein finds a lasting solution to problem.
In addition, government froze the company’s bank accounts earlier this year after it failed to pay its VAT since 2006 prompting RCC workers to threatened to go on strike due to delayed salary payments.
The company also extended 180-day turnaround programme.
While commenting on the issue, TransNamib acting Cheif Executive Officer (CEO) Hippy Tjivikua, said that railway is a capital intensive sector and at the moment there is a backlog as far as the amount of funds being pumped into Transnamib operations is concerned.
“We are happy that more funds are being injected into the parastatal’s operations because the construction of railways improves all other economic sectors and there is a need to keep the industry well funded” Tjivikua said.
He also said that when government injects funds on parasatals like Transnamib and RCC, it is an investment because other sectors like the mining, agriculture and the general transport industry in Namibia will reap the benefits.
Meanwhile, RCC General Manager for Development Properties and Corporate Services Gerson Karaerua who shared the same sentiments, welcomed the news adding that the financially troubled parastatal would not be able to operate and carry out its mandate effectively otherwise.
“The company needs more funding to operate effectively and the fact that government is providing us with yet another bailout is commendable on their part to ensure maximum service delivery to the country” he said.