Wean off burdensome parastatals

Mmegi Editor | Tuesday April 15, 2014 11:49

What is new in the report is the inordinate extent to which losses have risen and the equally steep subsidies that have been required to plug the hole at these subsidiaries. The BPC, alone, recorded a loss of P1.25 billion during the year under review even with the benefit of an P871 million subsidy. This year, the BPC will receive P1.5 billion in the form of a subsidy, on top of P1.4 billion last year.

This is in addition to annual tariff increases. By law, most of these parastatals are required to operate as going concerns, meeting their costs from their incomes and delivering on their statutory mandates, which for most of them include critical public services such as electricity and water provision. Over the years, tomes of reports, plans, strategies and policies have been made and adopted around the issue of loss-making parastatals, of which the privatisation policy has been the most prominent.

Fourteen years after Parliament adopted the policy, however, PEEPA’s efforts to privatise targeted public entities have repeatedly failed. Experts agree that these failures have been due in part to technical constraints but also the lack of political willpower associated with the absence of a law that would compel authorities to prioritise privatisation.

The merits and demerits of privatisation aside, a far less controversial policy mooted over the years has been commercialisation, where statutory amendments would enable some of these parastatals to operate along commercial lines. Other interventions suggested include liberalisation, where private players are allowed to compete alongside parastatals in service provision, as well as part-privatisation, where technical partners are brought in to partner in parastatals’ performance. The solutions are known, have been discussed and are well documented.

The goals are also known, being the reduction of taxpayers’ burden and enhancement of sustainable service delivery. It is thus tragic that state-owned entities such as the BPC continue to bleed public coffers dry, while effectively holding consumers at ransom by continuing to enjoy a statutory monopoly on a key service such as electricity.

Imagine a situation where the billions of Pula ceded to these parastatals in the form of lost dividend revenues, subsidies and loan guarantees were ploughed into the disadvantaged members of society? How about the lowering of personal income taxes, or at least the prevention of fresh increases? Or better working conditions for civil servants? The reason parastatals do not pay tax is because they pay a dividend back to government when they declare profits. They, therefore, are not paying taxes, not paying dividends, receiving further taxpayer monies as subsidies and not remitting these back to taxpayers in the form of lower utility costs.

                                                             Today’s thought

“Public service must be more than doing a job efficiently and honestly. It must be a complete dedication to the people and to the nation.”

 

                                                        - Margaret Chase Smith