Namibia’s Country Club ‘model’ -The future of SOEs in Namibia?

 

Some state owned enterprises (SOESs) are fairly obvious. With entities like Nampower, Namwater and Nampost government ownership is common in many countries  around the world. Others do not exactly jump off the page and really require a second look to understand how we got there. This is certainly the case with one of the poshest establishments in the capital, the Windhoek Country Club (WCC) which is 100% owned by the people of Namibia. 

 

The most obvious question is why would the state own a casino and  country club? It is certainly not at all a likely candidate for ‘nationalization’. The reason is historic. In 1994 Namibia agreed to host the Ms Universe contest but had no place to host it so with a period of 9 short months the hotel was built. The rest is history. 

 

But from a public policy standpoint was building the WCC with public funds just for a Miss Universe contest money well spent or was it just part of Namibia’s long problem with making highly political decisions on infrastructure project? But from a narrow commercial standpoint it was one of the more profitable investments made by the people of Namibia as unlike so many of the SOEs   this has  over the last number of years made a consistent profit.

 

Mr Jooste, the Minister of Public Enterprises  frequently uses the WCC as an unfortunate source of invidious comparison for so many of the other state owned hotels which do not have  a record that looks anything like that of the Windhoek Country Club.

 

But the interesting question is precisely why the WCC is making money and the state owned Namibian Wildlife Resorts (NWR) which holds some of the finest hotel and lodges in the country does not make money? NWR has become a financial albatross around the neck of the Minister of Finance and, according to senior government officials, has never made a profit? There is one obvious answer which jumps off the page and that is management and the board. In so many countries the Board of Directors of SOEs is stacked with politically appointed hacks, many from the public sector, who have no commercial ability and whose only interest is getting their board fees.

 

In the case of the WCC the management has long been in the hands of the Legacy Group which is a South African Hotel and leisure company with long years  of experience  of managing hotels in the region. NWR, on the other hand, while having a portfolio of some very fine properties in some excellent locations has never made a profit.  It has been and remains in the hands of government appointed managers.

 

Government ownership is not necessarily the problem with SOEs. Two minimal requirements for profitability are good management and a board of directors which is financially  astute and supportive of management. Until last year the NWR was run by a board of directors which was stipulated under the act and straight out of the ‘SOE Manual for Financial Disaster’. Under the NWR  Act (1998) the board was made of the Permanent Secretary of the Ministry Finance, Tourism , Lands Parks along with just one representative of businesses and labour. And the results were predictable- no profits. Last year, using the provisions of the new Public Enterprises Governance Act (2015) the government overrode the old NWR Act and appointed a new board made up of experienced people from the private sector.

 

However, by doing that the government has created a potential governance conflict at NWR. Do those on the board now reflect Namibia’s interest or simply that of the private sector? Tourism in Namibia is a peculiar business and for some private sector operators the fact that NWR resorts may not be well managed is a blessing in disguise. So if you own a private resort outside a national park, for example, and the NWR resorts in the park are not working effectively then you have an interest in maintaining the situation  exactly as it is. But those on the NWR  board do not appear to have an obvious interest in this sort of commercial sabotage. Those on the board from Avani or Swakopmund Hotel, for example,  have no obvious interest to support the  poor management at NWR.

 

If the recipe for financial success in SOEs as in private firms is based, at the very least, on having a good board and a good experienced commercial management, then why is NWR not making a profit? It is the second part of the equation that remains unchanged and the board has not yet brought in new management. Until professional management is brought in Namibia’s fine portfolio of hotels and resorts will remain a financial liability to the people rather than an asset. The question is why the board of NWR and the government have been unable to change the management and repeat the positive experience of the  Country Club? Perhaps Minister Jooste needs to consider the reasons why progress is not made in management reform. The longer reform is delayed the more resources government will have to pour into NWR rather than using them for important priorities like poverty alleviation. 

 

 

These are the views of Professor Roman Grynberg and not necessarily those of UNAM where he is employed.