On Tuesday, 7^th February 2023, the Ministry of Finance and Economic Affairs under the purview of the Directorate of State-Owned Enterprises convened a Performance Contract signing ceremony between the President of the Republic and some SOEs (Gambia Ports Authority, Social Security and Housing Finance Corporation and Gambia National Petroleum Company). According to Hon. Seedy K.M Keita, the Minister of Finance and Economic Affairs, the contracts are designed to ascertain that SOEs know exactly what is expected of them since it will measure performance and address weaknesses in their operations.

“The Performance Contracts feature strategically developed Key Performance Indicators (KPIs) unique to each Public Enterprise. They were developed following considerable research, negotiations, and consultations. Although overall, the KPIs are deemed challenging, we would still strongly encourage all SOEs here present today to strive and achieve them in order to meet our collective goal of gradually realizing the full potential of SOEs. Additionally, the agreements include accountability measures for performance – through incentives and compensation packages, as well as accountability measures for under-performance – through sanctions and similar punitive measures.” Hon. Seedy K.M. Keita

In line with Government objectives, Hon Keita said SOEs Reforms are one of the top priorities for his Ministry. He noted that this is due to the fact that SOEs have the potential to impact Government’s economic agenda via two extremes: either by derailing and causing serious havoc to our economic aspirations due to their underperformance that culminates in the need for Government to continuously bail them out, or to be harnessed to deliver public services in the most efficient and reliable manner whilst contributing meaningfully on Government public finances by paying dividends.

He further noted that over the past fifteen years, SOEs have posed considerable challenges for Government and posed various risks to fiscal operations. “In fact, up until recently, dividend payments from SOEs were almost non-existent, and instead, Government had to resort to continuous bailouts just to keep them afloat. A comprehensive diagnostic of the state of SOEs revealed that most have been hampered by a culture of weak corporate governance, inadequate financial management, a lack of technological infrastructure and maintenance, government interference, and related discrepancies”. Keita added

Speaking further, the Minister addressed that SOEs’ under-performances have been very constraining on public finances.  “Between 2018 and 2020 alone, almost 1% of GDP was spent bailing out SOEs, and this excludes debt service payments made by the Government on behalf of SOEs, which are yet to be reimbursed by the relevant Enterprises. In addition, Government has written off or taken over some SOEs’ debts totalling up to 3% of GDP. On their tax obligations to the state, SOEs paid only 0.2% of GDP in taxes on average from 2016-19, which reflects: large tax exemptions, limited ability to meet tax payments due to financial difficulties, and the unprofitability of most of the larger SOEs which are not liable to pay corporate income tax”. The Minister explained

Hon. Keita further observed that given the above, SOEs have posed various fiscal risks to the government, which include amongst others the direct and explicit government obligations related to external loans used for projects implemented and operated by SOEs. Another risk is the potential default on the loans contracted directly by SOEs with a government guarantee, and finally, fiscal risks that are implicit in nature, and stems from the accumulation of arrears owed by SOEs to other SOEs and contingent fiscal obligations to ensure that SOEs can maintain essential services.

Due to all the potential risks mentioned, the Ministry of Finance and Economic Affairs, through the Directorate of SOEs as an Oversight Department, has been playing a more proactive role in its SOE oversight functions by institutionalizing the formulation of quarterly SOE Financial performance reports that gauge their performances and quantifies the potential fiscal risks they pose to Government. He enumerated that current quarterly internal assessments of the financial performance of SOEs indicate that most are still financially distressed with serious liquidity challenges, whereas others are insolvent. “We have also drawn up thorough Turnaround Strategies for the most financially distressed SOEs, worked in collaboration with the National Audit Office (NAO) to ascertain that the Ernst & Young Audit recommendations are being implemented, and the Ministry is now on the verge of developing policy instruments pertaining to standardized Personnel Emoluments/Salary structure for all SOEs, Dividend Policy, Code of Good Corporate Governance, and Board and Audit Charters”. Keita Pointed.

On a more positive note, Hon. Keita reckoned that the SOE sector has assets totalling almost GMD 34 billion, around 25% of GDP, and the objective of the Ministry is to target a return on assets rate between 2% and 5%. The sector contributes significantly across all spectrums of the economy, ranging from transport and infrastructure, agriculture, media and communication, digital economy, energy, etc. In addition, the sector provides employment for almost 7,500 people, with the potential to employ even more people. “Last year alone, we received almost GMD 270 million as dividend payments from SOEs. This is proof that we are only scratching the surface when it comes to realizing their full potential”, Hon. Keita revealed.

Finally, Hon. Keita thanked President Barrow for his leadership and the keen interest he shows in the development of the SOE sector. He termed him as instrumental in challenging him to find the necessary solutions and address the challenges hampering this vital sector. He also thanked his colleague Ministers and Permanent Secretaries of the various SOEs’ line Ministries for their collaboration and dedication towards this reform agenda. He also expressed appreciation to the various Chairmen and Board of Directors, the Managing Directors, and management of the various SOEs present for being receptive and creating a conducive environment for Government to undertake this critical step.

He acknowledged that it has been challenging and even contentious at times, but everyone shares the same vision, noting that when these performance contracts are thoughtfully designed, prudently executed, and effectively monitored, the natural outcome will result in strong SOE performance underpinned by tangible results. 

Without Forgetting the development partners, Hon. Keita expressed appreciation to the World Bank, the International Monetary Fund (IMF), and the European Union (EU) for their reliable support and encouragement over the years.

He also recognized the consultants for the impactful role they played toward the attainment of this goal; the Permanent Secretaries, the Deputy Permanent Secretaries, the Directorate of SOEs’ Oversight, and the entire personnel of the Ministry for their leadership, unwavering commitment, and dedication toward the realization of this critical reform agenda.

Ebrima S. Jallow