Subject SOEs to greater scrutiny to support domestic revenue mobilisation - IFS

The Institute for Fiscal Studies (IFS), has called on the government to subject the State Owned Enterprises (SOE) to greater scrutiny in a way to mobilise adequate internal revenue to increase spending to save the government from loan and depending on donor countries. SOEs as legal entity established by the government to undertake commercial activities, according to the institute, has contributed considerably low when it comes to state revenue as many of them pay low or no dividend to the state. Speaking at the IFS pre-2018 budget forum on the theme “Mobilizing Adequate Domestic Revenue for Development” in Accra last Tuesday, the Executive Director of IFS, Prof Newman Kwadwo Kusi, said that SOEs’ revenue to the government was low as many of them did not disclose their budgets which aided the government assess their financial performances. “Many SOEs do not share their budget with the public and other relevant institutions”, he said. He mentioned that the country as of 2012 owned 33 SOEs with their assets and liabilities amounting GH¢32.9 billion and 16.6 respectively. Dividend, interest and profit from these SOEs, he said, contributed only GH¢561 million, about 12% of the total amount of tax revenue to the government in 2013. He mentioned however that some profitable enterprises such as Cocoboard annually pay dividend to the government to support the national budget. Even though these enterprises may not depend directly on the financial budget to finance their operations, those in the energy and utility sectors get affected by the government’s subsidy policies, he added. Causes of low dividend payments Prof Kusi emphasised that the cause of the low dividend payment by SOEs were the results of political interferences in the operations of SOEs, coupled sometimes with weak management and enforced theories. Although, there were transparent frameworks that assessed the management of these enterprises, it had caused a lot of then to continuously underperform. “They judiciously prepare their budgets for the information in fulfilment of their laws”. “Also the management of the enterprises are not publicly held accountable for their performances and budget reports”, he stated. According to him, the State Enterprises Commission (SEC) prepares and enters management performance contracts with many of these SOEs and their respective sector ministries, these contracts had never been enforced nor respected by the parties. Prof Kusi stressed that, though, some SOEs publish their financial accounts, they were faced with challenges of colossal legal claims known as Contingent Liabilities and Services Charges. These legal frameworks do not allow the enterprises to increase their equity share of their capital, therefore, forcing most of them to rely on expensive loans which continuously become a liability. “The obscurity of SOE budget’, he mentioned, ‘makes it difficult to assess the performance of these enterprises together with the huge interest charges and contingent liability, accounting for the low or no dividend payment by the enterprises to support the national budget.” Recommendation He therefore called on the government to review the country’s financial laws governing the state owned enterprises to enable the finance ministry to capture data on the finances and performances of all the SOEs. He also urged on the financial minister to transparently and comprehensively capture, monitor and give reports on the financial positions of SOEs to parliament during budget presentations. This, according to him will enable the government influence the investment decisions of enterprises to make them more efficient and support implementation of government policies. It will also enable the enterprises to undertake special revenue generation activities that will bolster their financial base capitals and make them pay more dividend to the government to support domestic revenue mobilisation, he added.