9 Category A parastatals’ E1.2bn drain

MBABANE – Nine Category A public enterprises have drained the economy E1.2 billion in five years, thus affecting their service delivery.

According to the 3ublic Enterprise 8nit Act of 1 , a Category A public enterprise is a company that is fully owned by government or in which government has a maMority interest or which is dependent upon government’s subvention for its financial support.

The Auditor General (AG), Timothy Matsebula, in his Financial Audit Report on the Consolidated Government Accounts of the .ingdom of Eswatini for the financial year ended March, 1, , noted that an analysis of the financial performance of Category A public enterprises over five years, financial years 1 -

, revealed that some of the public enterprises have continually been incurring significant losses.

Turnaround

The AG said the expectation was that well-managed public enterprises should at least be able to break-even (make adequate income to cater for all operating expenses) and further be able to develop and effectively implement turnaround strategies that would improve their financial performance and financial position.

According to Section ( )(a) of the 3ublic Enterprise and Monitoring Act of 1 as amended, the 3ublic Enterprise 8nit should, in consultation with the standing committee and governing body, monitor and review the financial affairs and budgets of each Category A public enterprise regularly, with the view of bringing to the attention of the standing committee the impending problems of such Category A public enterprise.

A breakdown of the losses showed that the biggest losers were the 8niversity of Eswatini (81ES:A) and Sincephetelo Motor 9ehicle Accidents Fund (SM9AF), with over E million and E million losses respectively. All nine enterprises in the last five years incurred losses of E1

. The AG said he warned the controlling officer in the Ministry of Finance, that the monitoring and evaluation of the public enterprises was not effective. The AG noted that government may have and had eventually been required to bail out the public enterprises, thereby increasing public spending and plunging the government into excessive deficits.

“The public enterprises may not be able to efficiently and effectively execute their mandates, thereby negatively impacting service delivery and consequently the lives of citizens. I advised the controlling officer to, through the 3ublic Enterprise 8nit, regularly monitor and evaluate the performance of the public enterprises and ensure that policies and strategies were put in place to improve their financial performance. :here viability of the public enterprises cannot be achieved, necessary decisions that are in the interest of the citizens should be taken,” Matsebula said.

In response, the report stated that the controlling officer said the queried companies were facing serious financial challenges and had noted from the budgets of the subverted entities that most of the costs were tied up in the wage bill as it ranges around per cent of the subventions, leaving a small amount for operational costs and were also accumulating quite a lot of liabilities and tend to use bank overdraft facilities to cater for their critical and operational cost.

Dividends

The AG also noted that in some Category B Enterprises where government bought shares, dividends had not been paid. “I noted with concern that for a seven-year period, the government did not receive any income (dividends) from its investment with Swazican Fruit Canners. The company has been declaring zero dividends from the year 1 to . Government’s investment is five per cent shareholding, which is equivalent to shares,” he said.

Further, the AG mentioned that the Financial Services Regulatory Authority (FSRA), which is operating in the regulatory and developmental category, was not declaring and paying dividends or special dividends to the government, even though it was operating at full strength and realising profits. Total profits realised by this public enterprise over five years amounted to E 1 1 .

“Even though discretion for declaring dividends was left with the Board, the policy emphasises that those entities operating at full strength and realising significant profits have to pay dividends or special dividends. I explained to the Controlling Officer that the profits realised by the enterprise over the years are a result of the government capital inMections. The taxpayers’ funds are invested in this public enterprise, hence a return on investment in the form of dividends is expected as a flow of funds back to the investor.”

To curb the ever-rising expenditure of public enterprise subvention, the government is in the process of merging and streamlining the institutions.