Making state-owned enterprises profitable: A bold roadmap for change

Ghana's cocoa industry, despite being the second-largest producer globally, faces losses. Mismanagement, excessive borrowing, and corruption are major issues for COCOBOD. Similarly, ECG struggles with inefficiencies like illegal power connections and unpaid bills. This results in over GH¢2 billion in annual revenue losses.

State-owned enterprises (SOEs) should be national assets, not liabilities. If private companies succeed where SOEs fail, the problem lies in management. To improve Ghana’s SOEs, we need a shift in mindset and leadership.

Professionalize Leadership

SOE leadership is often based on political ties instead of competence. This must change to include experienced business leaders. For instance, Singapore’s Temasek Holdings thrives due to its skilled executives rather than political appointees.

Ghana can adopt merit-based criteria for selecting SOE leaders. This ensures they have the necessary expertise and a record of success.

Cut Bureaucratic Waste

Many SOEs suffer from bloated workforces and inefficient processes. A 2020 report showed payroll expenses exceed 60% of some SOEs' budgets.

For example, Ghana Post has more employees than needed despite digital competition. Solutions include restructuring payrolls and investing in automation for efficiency.

Hold Leaders Accountable

Every SOE should publish audited financial statements regularly. Executives must justify their expenditures and be accountable for profitability.

Rwanda enforces performance contracts for SOE managers tied to financial targets. Ghana should implement similar contracts to ensure accountability among executives.

Adopt Private Sector Models

The government needs to treat SOEs as businesses rather than social service providers. Clear revenue targets and diverse income streams are essential for profitability.

ECG should innovate debt recovery methods instead of relying on tariff hikes. The China National Petroleum Corporation balances national obligations with commercial success through effective pricing models.

Encourage Public-Private Partnerships (PPPs)

Strategic partnerships with private companies can enhance capital and efficiency for SOEs. Successful economies use PPPs to revitalize state assets effectively.

Nigeria's Lekki Deep Sea Port project modernized infrastructure while easing government burdens. Ghana should explore similar partnerships in energy and transportation sectors.

Eliminate Political Interference

Political tools often misuse SOEs, leading to poor financial decisions. Governments must allow these institutions operational independence focused on long-term profitability.

Brazil’s Petrobras improved by reducing political meddling and empowering professionals to make decisions. Ghana needs similar reforms for minimal political interference in SOEs.

Enhance Governance and Transparency

Strong governance prevents corruption within SOEs. Boards should consist of experienced professionals rather than political allies.

Transparent procurement processes are vital to avoid mismanagement issues seen elsewhere globally, like Malaysia’s Khazanah Nasional which emphasizes accountability through robust governance standards.

Leverage Technology

Many SOEs still rely on outdated systems that hinder efficiency. Investing in technology can streamline operations and boost revenue collection significantly.

Kenya's M-Pesa transformed public service revenue collection by reducing leakages through digitization efforts that Ghana could replicate across various entities like ECG or GWCL.

Conclusion

Ghana's SOEs do not have to incur constant losses if managed well. With proper leadership and strategic direction, they can contribute significantly to national revenue.
It is time for bold reforms that prioritize profitable enterprises serving the people effectively.
The government, policymakers, and citizens must advocate for this necessary change.