State Interests and Governance Authority, 2023 State Ownership Report. 29 August 2024
The 2023 State Ownership Report – the eighth in the series – has received more media attention than the 2022 Report published a week or two earlier. Its publication was swiftly followed by the SIGA Annual Stakeholders Forum with much media coverage. The 2023 Report covers 147 of the 175 entities on SIGA’s register. The 147 are made up of 53 State-Owned Enterprises (SOEs), 31 Joint Venture (JV) entities and 63 Other State Entities (OSEs) employing a total of 93,446 persons with 1399 management personnel and 1196 Board members. The 53 SOEs, which are the primary focus of this review, have a total of 47, 745 employees.
Highlights from the Report which have made headlines include the reduction in the total amount of SOE net losses in 2023 as compared with 2022, the relative timeliness of the 2023 Report, and the Cabinet’s adoption of a new State Ownership Policy and Code of Corporate Governance. The message has been one of progress and self-congratulation.
To what extent are the outcomes of 2023, as reported, worthy of celebration? How much progress has been made since SOE reform was announced as part of the $15 million World Bank financed Economic Management Strengthening Project in 2016?
The 14 billion cedi SOE net losses reported for 2022 were explained as aberrations resulting from the harsh macroeconomic environment. The 2.57 billion cedi net loss reported for 2023, though an improvement over 2022, is in line with the losses in 2020 and 2021. By the measure of total net losses, not much has changed over the seven years of the reform program.
The timely publication of the 2023 report – just 8 months after the year end – is a significant improvement. It appears to be the result of a concerted effort by SIGA involving Presidential exhortations, stakeholder engagements and collaboration with agencies such as the office of the Controller and Accountant General. However, timeliness has been achieved at some cost in the quality of information provided. For the 2022 Report, 92 entities provided audited financial statements while 54 provided management accounts. For 2023, 60 entities provided audited financial statements while 87 submitted management accounts.
What significance should we give to the reported adoption of a State Ownership Policy and a Corporate Governance Code? It is too early to tell whether the adoption of these documents has made or will make a difference.
The Report makes an effort in its analytical chapters to distinguish between the performances of different entities. Attempts to assess the performance of individual entities led to the initiation in 2022 of a Public Enterprise League Table (PELT) with fanfare and an awards ceremony based on 2020 performance. The second edition of the PELT awards, based on 2021 performance, was held in August 2023. The third edition based on 2022 and 2023 performance was held in September 2024.
Appendix 8 of the 2023 Report rates the 69 entities which signed performance contracts with SIGA on a scale of 0 to 5 based on criteria summed up as financial indicators, dynamic effect dimensions, management improvement/governance, project dimensions and efficiency. Five SOEs [Bulk Oil Storage and Transport Company (BOST), Volta River Authority (VRA), Ghana National Petroleum Corporation (GNPC), State Housing Company, Consolidated Bank Ghana (CBG)] scored more than 4 out of 5 points in 2023. On the other hand 6 SOEs [Ghana National Procurement Authority (GNPA), Produce Buying Company (PBC), InterCity STC, Ghana Railway Company, Architectural and Engineering Services Limited (AESL)C, Petroleum Hub Development Corporation (PHDC)] scored less than 2 points.
For the lowest-scoring entities in 2023, a consulting firm is to be engaged with support from Agence Française de Developpement (AFD) to “assess and identify operational gaps and deficiencies and develop a Performance Improvement Plan for implementation”.
The Report is also attentive to the differences between entities in terms of size. It provides a spotlight on the ten largest SOEs by total assets [VRA, Electricity Company of Ghana (ECG), Ghana Cocoa Board (Cocobod), GNPC, Bui Power Authority, Ghana Gas, Northern Electricity Distribution Company Limited (NEDCO), Ghana Ports and Harbours Authority, CBG and Ghana Grid Company Limited (GRIDCO] accounting for 80% of total revenues in 2023, as well as the ten smallest [Ghana Publishing Company, Precious Minerals Marketing Company, PSC Tema Shipyard, Ghana Integrated Iron and Steel Development Corporation (GIISDEC), Ghana Commodity Exchange Ltd (GCX), Ghana Supply Company, Ghana Integrated Aluminium Corporation (GIADEC), Petroleum Hub Development Corporation, GNPA, Irrigation Company of the Upper Regions (ICOUR)].
Clearly the performance of the largest entities has a substantial impact on the aggregate outcomes. The observation is made that none of the 10 largest entities which are beneficiaries of government loans, guarantees, recapitalization and other support, pay dividends. Three of the ten – ECG, VRA, GNPC – were among the five[1] identified for pilot corporate governance reform in 2017. Not much has been said about the outcome of those reforms. However, the World Bank’s completion report for the Economic Management Strengthening Project[2] claims success in the implementation of annual Corporate Governance Action Plans for the five entities with an average implementation level of 90.5%.
What do the claims of success mean? Neither the public record of these entities nor their performance as documented in the 2023 SOR suggest that there has been a fundamental change in their performance over the last seven years. The 2023 SOR announces that 16 entities including all of the 10 largest SOEs have been selected for comprehensive performance evaluation as a component of a new World Bank financed program. A $150 million loan agreement was signed in May 2023 for the Public Financial Management for Service Delivery Program.[3] $15 million of this amount is for the purpose of strengthening the oversight, performance management and fiscal discipline of SOEs. According to the SIGA Director-General, the evaluation of these entities is to be completed and submitted to Cabinet on 30 November 2024. It turns out that 4 of the 5 entities selected for the reportedly successful pilot corporate governance reforms are among the 16 selected for comprehensive performance evaluation. So 7 years after the 2016 World Bank loan, and after three PELTs, a new World Bank loan is accompanied by new promises about the evaluation of SOE performance with the hope of improved outcomes by 30 June 2027.
How serious are we about the goals announced in the 2016 SOR of reforming the governance of SOEs to enhance their financial viability and end the drain on government finances? SIGA has conducted much activity – an Equity Study, an Annual Stakeholder Forum, PELT awards, Editors Forum, a 30-member delegation to Beijing for a 6-day study tour in September 2023 etc. But the performance of the activity is no guarantee of results. It is necessary to measure the results against the proclaimed goals.
How does SIGA itself measure up to the compliance and performance standards it has been propagating? SIGA does not appear on the list of 175 specified entities, and its own information is not included in the State Ownership Reports. So the legitimate questions of whether SIGA is providing good value for the money it spends and how its performance compares to other entities within its category remain to be answered. SIGA’s enabling Act provides for its annual report to be submitted to parliament within 60 days of receipt of the audited annual financial statements. The 2023 Annual Report published on the SIGA website on 10 October 2024 appears to be the only one of these reports currently available. What answers it provides as to SIGA’s performance may be the subject of a separate review.
The annual State Ownership Reports provide a snapshot of the state of SOEs and a useful starting point for the evaluation of SOE governance and performance. The information provided by the 2023 SOR reminds us that unless the objective is simply the performance of activity, we are still a long way from where we should be.
[1] The other two were TDC Development Company Ltd. and Ghana Water Company Ltd.
[2] https://documents.worldbank.org/en/publication/documents-reports/documentdetail/099122523195518498/p1521711ae3d5600e1927c1bc923e272adb
[3] https://documents.worldbank.org/en/publication/documents-reports/documentdetail/099101023160519682/bosib02fdee4a606e0b42c01c46a21cb5f7
Author
Dr. Dotse Tsikata is a Legal Practitioner and Lecturer in Company Law.
