The launch of the 2020 Report coincides with increasing public interest in the fortunes of SEs. It was truly fascinating to observe strong and varied opinions expressed on various platforms by the general public at the recent national discourse on SOEs in the aftermath of the Policy Forum that took place on the 28th of January 2022. The culture of accountability being generated through these reports and other reforms must and will be harnessed to ensure sustained impacts.
In honour of our pledge, we have improved the coverage and scope for this year’s report. The 2020 Report is based on 132 SEs in total, made up of 47 SOEs, 17 JVCs, 54 OSEs and 14 Minority Interests. Whereas this clearly contrasts with the 106 SEs covered in the 2019 edition, the 2020 Report has also introduced a new sub-category - “Minority Interests” to enhance context-driven assessment. The “Minority Interest” simply represents entities, mostly mining firms, in which the Government of Ghana maintains a shareholding threshold of less or equal to 10 percent.
It is also a measure of progress that out of the 132 entities, 79 submitted audited financial statements. This represents a marked improvement over the maiden State Ownership Report in 2017, where only five audited financials were submitted for analysis. Nineteen (19) other SEs submitted draft accounts, whilst the number of management accounts received totaled thirty-four (34).
Stringent steps are being taken to ensure that the forty-one (41) entities that could not honour their reporting obligations do so in the next reporting cycle. Other notable enhancements in this Report include a special focus on key entities with high liabilities as well as summary results of the 2020 Performance Contract Evaluation implemented by SIGA. For the first time, the Report also features employment data from over 100 entities. Where available, this data has been disaggregated by gender in light of increased focus on gender parity in the modern workplace.
Against this background, the aggregate performance shows that more urgent and collective work is needed. SOEs recorded an aggregate loss of GH¢ 2.61 billion in 2020, even though that represents a nearly 50 percent (49.2 percent) improvement on the 2019 aggregate net loss of GH¢5.16 billion. Equally impressive is the fact that aggregate revenue outturn for SOEs surged by nearly 20 percent from 2019’s performance of GH¢37.91 billion to GH¢45.23 billion in FY2020.|
JVCs, on the other hand, achieved an aggregate net profit of GH¢11.81 million as compared to an amount of GH¢1.05 billion recorded in 2019; representing a significant decline. The devastating impact of the COVID-19 Pandemic tended to disproportionately affect JVCs and severely hampered their revenue-generating ability. For the new sub-category, the Minority Interests, an aggregate net profit of GH¢11.25 billion was recorded in 2020 as against a net loss of GH¢62.17 million for 2019.
In reading these results, we must be very mindful of how extraordinary the year 2020 was vis-à-vis the vital role this Report plays in providing information for an objective evaluation of SEs’ performance and its value of continued public stake.
The Year 2020 is unlike any other in almost a century for households, businesses and governments. The outbreak of the COVID-19 pandemic in March 2020 significantly disrupted economic activity and lockdowns resulted in massive job and income losses to households, businesses and governments. Positive global and regional economic growth outlooks were quickly revised to reflect economic contractions. In Ghana, the fiscal gap, created by loss of revenue and rising expenditures, amounted to almost GH¢25 billion.
Decisive and bold measures were taken to support businesses in both the private and public sector. Upon request, Government provided payroll support of GH¢127.5 million for the worst affected SOEs, JVCs and tertiary institutions whose operations were severely impacted by the closure of our borders and the imposition of movement restrictions.
The Bank of Ghana also announced complementary measures to support businesses. Against these developments, expectations on performance of SEs have to be recalibrated. That said, and as we seek economic recovery to build forward better, it is crucial to emphasize that the practice where loss-making SEs continuously increase operating expenses (OPEX) through personnel and wage increases must give way to sound business management practices. All SEs, including almost the third of Other State Entities (OSEs) that recorded deficits, must reimagine their business models and strive for prudent financial management and operate within budget.
Today, some of the biggest issues revolve around the pandemic’s knock-on effects: supply chains, inclusive growth, and vaccines. Even before we have a full handle on these, the Russia-Ukraine War has increased uncertainties, which has triggered soaring food and fuel prices as well as financing costs, resulting in the rising cost of living.
As a country, we see SEs as a critical part of the journey to fiscal consolidation and macroeconomic stability. Therefore, non-productive and imprudent approaches must be jettisoned for more innovative methods to enable SEs comply with the directives emerging from Cabinet at its first quarter meeting in March, 2022. As leaders, entrepreneurs, and captains of industry, we must repurpose and adapt new operating models that reflects the times we live in.
Finally, I urge governing boards of our SOEs in particular to explore long-term progressive plans anchored on constructive strategies in the face of elevated uncertainty, worldwide volatility and national economic concerns. We must choose courage over comfort. We must choose what is right over what is fast and easy; and we must prioritize and practice our values and pledge to our Nation. This will enable us create stronger operating levers in current and future business cycles as we collectively build forward better.