Public Companies in Namibia India and China- who pays for the losses?
Namibia, India and China have one thing in common- all have had, at one point or another, a strong socialist ideology that has meant that government has created a very large number of state owned enterprises (SOEs). These were seen as vital building blocks necessary to help the country develop and transform that could not be provided by the private sector. In the case of Namibia there numbers have grown from a mere 11 enterprises in 1990 to well nearly 98 today. The governments in all these countries have not hesitated to use state ownership and monopoly as a means of achieving its objectives.
In India there are some 244 SOEs. Few of these Indian SOEs are considered to be paragons of high productivity but the government of India has created numerous monopolies and provided considerable assistance to its publicly owned firms to keep them afloat. Some 80% of the total profit made by state-owned firms in India or 1.2trn rupees (N$300bn), comes from coal, petroleum products, power generation and oil where the government has granted considerable assistance or straight monopolies. In India SOEs made an average return has declined from over 17% of equity a decade ago and this has declined to what is now slightly over 11% in 2016.
In China the SOEs are a complete contrast to the situation in Namibia and India and have been a vital engine of economic growth, government revenue and employment for the country. In 2015 the Chinese SOE sector contributed 15% of the central government’s revenue, something that would have Mr Schlettwein green with envy. Averages always tend to hide significant variation and this is certainly true in China where many of the SOEs are mere 'corporate zombies' - the walking dead . But the government of China is only willing to move slowly with consolidation into what is emerging, because of employment effects. The largest SOEs will become global economic giants that once privatized will be able to compete fully on a global scale. In China it has been the massive profits of state monopolies such as exist in tobacco, railways oil, mining as well as the very significant returns from state owned banks that have generally provided the profits that have allowed the government to fund its operations as well as the many smaller companies that the government is unwilling to privatize.
While the exact number of SOEs in Namibia is contested, with IMF claiming it is 33 but a complete list of the 98 Namibian SOEs on the Ministry of Public enterprises web site. The most profitable ‘SOE’ is of course Namdeb which, the De Beers resident director Mr Daniel Kail recently claimed, contributed $3.7 billion in 2016 in taxes royalties and payments to the coffers of Namibia. But Namdeb is not really an SOE, because the government owns 50% rather than 51% of the equity in the company. That 1% is what really makes a difference because it means the government has the right to obtain dividends but not to manage the enterprise as it wishes. Because of the relationship, which comes very much from the relationship between De Beers and neighboring diamond rich Botswana, management must be by consensus and that consensus is that Namdeb must be run on a commercial basis.
But when you start to go down the list of public companies that are owned by the state there are very few where the contribution is positive. Some have made modest positive contributions like Nampower, Namport and Nampost. Others have become a financial albatross around the neck of the Ministry of Finance. Air Namibia, Road Contractors National Wildlife and Namcor have placed a significant financial burden on the nation over the years. Air Namibia alone has needed some $4.7 billion of financial injections since 1997 and there appears to be no end in sight.
None of this is of course news and these habitual SOE losses are common throughout Africa and certainly not unique to Namibia. But these losses are only possible if you have an economic sector from which the surpluses are generated to make it possible to pay for the losses. In China and India these are the commanding heights of the economy and state monopolies which are themselves heavily supported by government. And in our case it is in effect Namdeb that pays for the losses of the rest of the parastatal sector of the economy. Without the diamonds it would be difficult for government to sustain the level of subsidies that are offered annually by the Minister of Finance to these companies. Put another way Namibia is paying for the losses of its public enterprises with something even more precious than the nation’s diamonds, it is the most valuable of things- time. It is time that we have little of, as the diamond deposits will eventually end, the time that we are prosperous and being able to make sensible decisions by ourselves. The day will come when the diamonds are gone and if we continue on the current path of unsustainable losses by SOEs the decisions will then not be made by Namibians but by those who will dominate policy making in the country and that will be the boys (and girls) from Washington, the International Monetary Fund.
These are the views of Professor Roman Grynberg and not necessarily those of UNAM where he is employed 