Tanzania government says seeks to change state corporations not going into business

Dar es Salaam. The Tanzanian government has said its decision to transform state-owned enterprises (SOEs) aims at increasing efficiency and performance and not competing with private sector businesses.

Boosting performance, however, involves implementing commercial practices within public institutions to enhance efficiency and profitability.

The Permanent Secretary in the Ministry of Industry and Trade, Dr Hashil Abdallah, made the clarifications following concerns that the government's plan to transform public institutions into commercially viable entities could result in cutthroat competition for business between the public and private sector corporations.

But Dr Abdallah emphasised that the objective was to cultivate a corporate mindset within state institutions to improve service delivery and attract customers while operating profitably.

"We aim to cultivate commercial acumen within public institutions to enhance service quality, customer attraction, and profitability," Dr Abdallah stated, reaffirming that the government's role was to facilitate business rather than directly engage in competitive ventures with the private sector.

As a matter of fact, the office of the Treasury Registrar (TR) has been mandated to ensure state entities operate productively.

Until April 2023, there were a total of 298 public institutions in Tanzania. Out of them, the government is a majority shareholder in 248 while it is a minority shareholder in the rest, according to the Treasury Registrar, Mr Nehemiah Mchechu.

Speaking at a forum of public institutions’ chief executive officers in Arusha in August last year, President Samia Suluhu Hassan warned that the exit doors were open for loss-making state entities under her government’s reform agenda.

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

But economists cautiously welcomed the government's transformation plan, stressing the importance of public entities adopting business-like approaches without compromising their public service mandates.

They emphasised the need for public institutions to distinguish themselves from the private sector by focusing on service quality rather than profit maximisation.

According to experts, the effectiveness of public institutions hinges on public trust and their ability to provide quality services efficiently. Operating profitably could enable these institutions to reduce their reliance on government subsidies and contribute dividends to the government.

Development Economics Professor Abel Kinyondo from the University of Dar es Salaam emphasised the importance of public institutions prioritising service delivery over profit maximization.

He advocated for efficiency, quality, and standards to attract customers and achieve economies of scale.

Echoing similar sentiments, University of Dodoma lecturer Dr Lutengano Mwinuka underscored the need for public institutions to embrace private sector management practices, including efficiency, effectiveness, and innovation.

Collaboration with the private sector was deemed essential to leveraging resources, expertise, and best practices.

An economist and business expert, Dr Donath Olomi, emphasised the potential of the public sector to positively impact the economy through strategic thinking and efficient operations.

He called for a shift in public accountability towards outcomes and urged leaders to adopt a business mindset to drive results.

To enhance the viability of state-owned enterprises, the Treasury Registrar announced plans to ensure that directors and board members possess relevant skills and experience.

Additionally, efforts will be made to streamline decision-making processes and establish performance indicators for effective governance.

The government's approach aims to strike a balance between public service delivery and commercial viability, signalling a shift towards more business-oriented practices within the public sector.

Through strategic reforms and collaboration with the private sector, Tanzania aims to unlock the full potential of its public institutions for sustainable economic growth.