Samia: No mercy on inefficient parastatals under new reforms

Arusha. President Samia Suluhu Hassan warned yesterday that exit doors were open for loss-making state entities under the coming reforms.

The new reforms will entail recapitalizing some parastatals, merging others, or scrapping those that cannot be rescued altogether.

Reforms would also include elevating the office of the Treasury Registrar (TR) to an authority with powers to ensure state entities operate productively.

President Hassan, who was opening a forum of public institutions’ chief executive officers (CEOs), clarified, however, that the government would only close down parastatals if it was absolutely necessary.

But the government would not continue to support those organisations that continue to drain public resources by making losses perennially.

There could also be some public institutions that may be shown the exit door after they have outlived their usefulness and, therefore, are no longer relevant to the economy or government structure.

“The exercise will be as consultative as possible. It is important to give the heads of the organisations a chance to propose the way foward for their institutions,” President Hassan noted.

The public bodies—parastatals, executive agencies under different ministries, and higher learning institutions—account for 17 percent of the jobs in the public sector.

She challenged the boards of the public institutions they headed to ensure that they operated productively and profitably.

The state will fully support those that operate at a profit that would enable them to pay dividends and other mandatory contributions.

The parastatals, which are not directly involved in revenue-generating businesses, will have to deliver the impactful services expected of them efficiently.

The government, she said, has invested a whopping Sh73 trillion, a significant portion of the country’s annual budget, in the 248 public enterprises.

President Hassan told the CEOs that she would not like to see some parastatal organisations continue to get regular subsidies from the Treasury.

Under the new reforms, the parastatals would be encouraged to sell their shares to the public “so as to reduce dependency on the central government”.

In Africa, the system has worked perfectly well in Ethiopia and Egypt, and it should be embraced in Tanzania to make the parastatals financially stable, she noted.

The Head of State was addressing nearly 1,000 CEOs and other officials from about 250 state entities at the Arusha International Conference Centre (AICC).

She, however, defended some parastatal organisations, partly attributing their dismal performance to political interference.

She cited the conservation agencies, saying that despite having significant financial resources, their heads are often forced to part with cash by some senior state officials.

“Conservation agencies generate billions of shillings. But they have expensive boards of directors and are routinely asked for money by senior officials from the central government, including cabinet ministers”, she said.

She ordered that from now on, the coffers of the conservation agencies should no longer serve as cash cows for ministry officials or other public figures.

The minister of State in the President’s Office (Investment and Planning), Prof Kitila Mkumbo, said public entities will remain a key sector of the economy and that they should be supported.

“Ailing public enterprises is a hindrance to national development. Such enterprises (parastatals) should either be revived or scrapped”, he pointed out.

Prof Mkumbo said the government’s plans to engage the public sector in economic growth should not be seen as compromising with similar support for the private sector.

“The government is not interfering with the competitiveness of the private sector in the market. The two sides should complement each other in business development and investments”, he said.

The minister noted before a fully packed Simba Hall at the AICC that repeated outcries for reforms of some parastatals were a necessity.

He said some state institutions have failed to discharge their duties to the point that they have lost the public’s trust.

He cited a case of the Dar es Salaam port where an importer failed to clear his container for over a month due to red tape.

According to Prof Mkumbo, the operations of the port involve about 30 public bodies and seven ministries, often caught in a labyrinth of bureaucracy.

He stressed that although the ministries are tasked with monitoring the performance of their respective parastatals, they should allow full autonomy to the boards and management.

The Treasury Registrar, Nehemiah Mchechu, told the CEOs of 248 public entities at the three-day forum to get ready for reforms that are already underway.

The government has majority shares in about half of the entities represented at the forum.

He said the government has smaller shares in some of them.

“Under the reforms, we want to make some of the parastatals fully autonomous and 100 percent self-reliant”, Mr Mchechu pointed out.

However, ACT Wazalendo leader Zitto Kabwe stressed that most of the parastatal organisations should be reformed no matter how they perform “to look afresh”.

He called on the government to enact new laws on the parastatals instead of merely making amendments to the existing ones.

Last month, Mr Mchechu revealed that the government was concluding an evaluation of the corporations’ performance, as directed by President Samia Suluhu Hassan a few months ago.

The evaluation also includes underperforming companies in which the government has shares.

He stressed the importance of government corporations fine-tuning their operations to maximise returns on the Sh70 trillion invested in these organizations.

“The government wants to see accountability and efficiency in the corporations it owns,” emphasised Mr Mchechu, while receiving Sh2.5 billion in dividends from TIPER, Tanzania’s largest oil storage facility.

“Next month, the leaders of government corporations and companies that the government has shares in and I will have a meeting with the President,” said Mr Mchechu, referring to the ongoing meeting in Arusha.

To ensure the viability of state-owned enterprises, directors, chairpersons, and board members will be required to possess relevant sector-specific skills, Mr Mchechu outlined.

He noted that inefficiencies and poor contributions to the Gross Domestic Product (GDP) that is below one percent were largely due to incompetent leadership.

“We want [underperformance] to be a thing of the past. We are determined to make a revolution. We want to restore accountability in government corporations,” declared Mr Mchechu.

“We are not ready to keep paying salaries to people who are not productive due to various reasons. The time for having CEOs and board chairpersons who have no expertise in the areas they are working with is no more,” Mr Mchechu noted.