Na­tional bud­get 2015/2016

Lesotho Times - - Business -

en­ti­ties will lead to nu­mer­ous costly mis­takes and waste of tax­payer re­sources. I wish to en­cour­age the min­is­ter to re­flect care­fully on these is­sues and to speak more au­thor­i­ta­tively dur­ing her sec­ond bud­get speech in 2016.

Le­sotho’s poor ex­pe­ri­ence with PPPS should not mean that it is wrong to de­liver cer­tain ser­vices through the pri­vate sec­tor. As al­ready in­di­cated above, the costly ex­pe­ri­ences arise from pol­icy fail­ures (lack of pol­icy to gov­ern and ca­pac­ity to de­sign and man­age the PPPS) rather than from the idea it­self. Go­ing for­ward, these gaps must be ad­dressed vig­or­ously. More im­por­tantly, where spe­cial ex­ec­u­tive agen­cies ex­ist (LNDC, BEDCO, Le­sotho Tourism De­vel­op­ment Cor­po­ra­tion, Le­sotho Rev­enue Au­thor­ity, LHC, Wa­ter and Sew­er­age Com­pany, Le­sotho Elec­tric­ity Com­pany, Le­sotho Com­mu­ni­ca­tions Au­thor­ity, Le­sotho Wa­ter and Elec­tric­ity Au­thor­ity, Na­tional Univer­sity of Le­sotho, Le­sotho Col­lege of Ed­u­ca­tion, etc), these must be prop­erly over­seen, re­sourced and their gov­er­nance strength­ened so that they be­come ef­fec­tive ex­ec­u­tive arms of their min­istries. Par­ent min­istries must stop com­pet­ing with them and in­stead gen­er­ate pol­icy only and over­see ser­vice de­liv­ery through these agen­cies.

At the mo­ment, the re­la­tion­ship be­tween par­ent and spe­cial pur­pose agen­cies can be de­scribed as com­pet­i­tive, hos­tile, and ne­glect­ful. Their suc­cess is de­pen­dent on a par­ent min­istry that has sen­si­bly de­fined its and the agency’s man­date.

Vii.com­mit­ment to

doubt­ful The word re­form is men­tioned 25 times across the speech re­lat­ing to in­sti­tu­tional, gov­er­nance, civil ser­vice, rev­enue, struc­tural, fi­nan­cial and pri­vate sec­tor is­sues. There are, how­ever, sig­nals that cre­ate doubt. For one thing, it is not the first time this same gov­ern­ment has been talk­ing about re­forms.

In ad­di­tion, there are other tech­ni­cal rea­sons that sug­gest re­form might be chal­leng­ing for this gov-

re­form

ern­ment, as out­lined be­low.

Po­lit­i­cal re­forms In Para­graphs 74 and 75, the min­is­ter pro­poses a pal­try M2 mil­lion for con­sti­tu­tional, par­lia­men­tary, se­cu­rity sec­tor and public ser­vice re­forms. Ac­tions speak louder than words. For a start, how would a gov­ern­ment that con­sis­tently de­nies that there is in­se­cu­rity in the coun­try per­pe­trated by sec­tions of the army gen­uinely lead se­cu­rity sec­tor re­form — what in gov­ern­ment’s view is wrong with se­cu­rity?

A start­ing point should be the New Zealand pack­age, but these should have been im­ple­mented be­fore the elec­tion un­der the veil of ig­no­rance. John Rawls’ (1971) veil of ig­no­rance sug­gests that in think­ing about a fu­ture des­tiny where there is an equal chance for a good and bad out­comes, each in­di­vid­ual will seek the most rea­son­able prin­ci­ples of jus­tice. Be­fore the elec­tion, all par­ties would have sup­ported the most fair and pro­gres­sive re­forms. Af­ter the elec­tion, po­lit­i­cal op­por­tunism will rear its ugly head and Le­sotho will once again end up with as much half-baked re­forms as un­der the IPA process.

The so-called New Zealand re­forms could have been im­ple­mented as part of the new elec­toral model to make it work bet­ter and avoid the com­pli­ca­tions of the coali­tion gov­ern­ment Le­sotho is now fac­ing. Cooler heads should pre­vail, but as al­ready said, past ex­pe­ri­ence with re­forms sug­gests that pow­er­ful par­ties will pre­vent rad­i­cal re­form. The al­lo­ca­tion of only M2 mil­lion is pre­scient and deeply sym­bolic.

In­sti­tu­tional re­forms As al­ready in­di­cated, Le­sotho’s public fi­nan­cial man­age­ment is largely dys­func­tional and costly. Le­sotho has lost donor bud­get sup­port mainly be­cause of the lack of con­fi­dence in its han­dling of both na­tional and donor funds.

In some cases, donors have elected to dis­burse money to Le­sotho un­der pro­ject sup­port so that they have full con­trol of how the money is used by Le­sotho.

Per­sis­tent al­le­ga­tions and ac­tual acts of cor­rup­tion have also not helped. There is no fi­nan­cial ac­count­abil­ity since 1975 de­spite the sem­blance of com­plet­ing an­nual fi­nan­cial ac­counts; IFMIS is largely co­matose with its data in­ac­cu­rate dis­trusted; public pro­cure­ment is re­plete with cor­rup­tion and in­com­pe­tence; plan­ning is not in­te­grated into bud­get­ing pre­vent­ing poli­cies be­ing prop­erly re­flected in the bud­gets.

The Min­istry of Fi­nance is once again im­ple­ment­ing public fi­nan­cial man­age­ment re­forms. In­di­ca­tions are that these will also fail — it has taken over a year to fully staff the re­form of­fice and at any rate a sep­a­rate re­form of­fice and wide­spread use of con­sul­tants will alien­ate the of­fices of the min­istry that are ac­tu­ally re­spon­si­ble for re­forms. To suc­ceed, the new min­is­ter must care­fully re­view the re­form pro­gramme and re­struc­ture the weak­ened Min­istry of Fi­nance at the same time.

All agen­cies re­lated to hu­man re­source and wage bill man­age­ment should be re­formed ur­gently. The Min­istry of the Public Ser­vice du­pli­cates the func­tions of the Public Ser­vice Com­mis­sion (PSC) and it presents no clear sep­a­rate and ad­di­tional value over and above the func­tion of the PSC.

The Min­istry con­cen­trates re­cruit­ment pow­ers and sub­ject chief ac­count­ing of­fi­cers to ad­di­tional au­tho­ri­sa­tions that amount to noth­ing more than red tape.

Par­lia­ment and the Min­is­ter of Fi­nance can en­trust M2 bil­lion to PS Ed­u­ca­tion and di­rect that he or she re­port af­ter us­ing the money at the end of the year, but the Min­istry of the Public Ser­vice be­lieves the same PS can­not prop­erly hire a cleaner.

The drift­ing of LIPAM’S man­date away from its core in-house sup­plier of cus­tom­ized skills has also con­trib­uted to the dwin­dling knowl­edge in the public ser­vice. LIPAM is nei­ther IDM nor NUL nor Limkok­wing and should stop think­ing in that di­rec­tion. It is an in-house fully-paid-for un­cer­ti­fied train­ing in­sti­tu­tion that fo­cuses on re­tain­ing good gov­ern­ment prac­tices. I would re­shape it.

On the other hand, the PSC is a mori­bund pa­tron­age body where lead­ers re­tire their favourite peo­ple or send oth­ers who are in­con­ve­nient else­where.

Gov­ern­ment should elim­i­nate the Min­istry of Public Ser­vice and re­struc­ture the PSC to per­form the func­tions fore­seen un­der the New Zealand re­forms, namely de­politi­cis­ing the public ser­vice, hir­ing of prin­ci­pal sec­re­taries and other se­nior of­fi­cials and man­ag­ing per­for­mance for these se­nior of­fi­cials.

This would re­quire amend­ment of clauses in the con­sti­tu­tion, but I am con­fi­dent there would be bi­par­ti­san sup­port for such pro­gres­sive work.

Gov­ern­ment says it sup­ports the pri­vate sec­tor, but hogs ser­vices that it then pro­vides poorly. It can quickly trans­fer to the pri­vate sec­tor many ve­hi­cle and num­ber plate ser­vices, pay­ments of so­cial trans­fers in­clud­ing pen­sions, or­phan and other so­cial or­phan trans­fer grants, broad­cast­ing, clean­ing ser­vices, farm in­put sup­plies, pro­vi­sion of farm­ing ex­per­tise, etc.

How­ever for this to work, gov­ern­ment would have to re­think its man­date. Cen­tral gov­ern­ment must limit its par­tic­i­pa­tion in the econ­omy to pol­icy for­mu­la­tion, reg­u­la­tory/leg­isla­tive agenda, ef­fi­cient con­tract man­age­ment and pro­vi­sion of busi­ness in­fra­struc­ture.

Its con­tin­ued heavy par­tic­i­pa­tion dis­places and crowds out pri­vate eco­nomic en­ter­prise. As an il­lus­tra­tion, gov­ern­ment ten­ders and pay­ment of sup­pli­ers play an im­por­tant role to un­der­mine — and not to up­lift — the pri­vate sec­tor. Busi­ness to busi­ness re­la­tions have a much bet­ter up­lift­ing ef­fect of pri­vate sec­tor ca­pac­ity than ten­der­preneur­ship.

Viii.con­clu­sion The pol­icy frame­work un­der­pin­ning the FY2015/16 is not cred­i­ble. Key ques­tions re­main unan­swered:

a) The fi­nanc­ing of the bud­get is vague and there is no cer­tainty that gov­ern­ment could mo­bilise for­eign loans to the mag­ni­tude pre­sented; that just over half the fis­cal deficit could be fi­nanced with­out im­pair­ment to im­port cover; and that gov­ern­ment can raise part of the other half from do­mes­tic bor­row­ing par­tic­u­larly in the con­text of po­lit­i­cal in­sta­bil­ity and re­pres­sion.

b) The planned re­course to ad­di­tional new rev­enues is not cred­i­ble. Past fis­cal be­hav­ior by Le­sotho gov­ern­ments does not sup­port like­li­hood of tax­ing the al­ready over-taxed econ­omy. Fur­ther, even if there was such re­solve, not much room is left in an econ­omy with a rudi­men­tary and stag­nat­ing pri­vate sec­tor.

c) The de­vel­op­ment of the pri­vate sec­tor and the ex­pan­sion of the econ­omy as a source of ad­di­tional rev­enues is a long-term process that will not de­liver the needed rev­enues to avoid a fis­cal crunch. The bud­get it­self is silent on how the econ­omy can be ex­panded and the pri­vate sec­tor de­vel­oped.

d) The com­mit­ment to po­lit­i­cal, se­cu­rity, public ser­vice and SACU re­forms is not cred­i­ble. So far gov­ern­ment de­nies the pres­ence of in­se­cu­rity and po­lit­i­cal in­sta­bil­ity and as such it can­not lead re­forms it does not be­lieve in. The present gov­ern­ment has ben­e­fit­ted from the politi­ci­sa­tion of the public ser­vice and as such it would not be in a hurry to de­politi­cise the public ser­vice.

Fi­nally, the ex­e­cu­tion of the pro­posed bud­get will not suc­ceed and in­vest­ment will not ma­te­ri­alise un­less se­cu­rity, rule of law and po­lit­i­cal and macroe­co­nomic sta­bil­ity are re­stored.

There is un­cer­tainty as to what gov­ern­ment sees as the end game of the un­for­tu­nate in­ci­dents in the last weeks. Un­cer­tainty, re­pres­sion, and lack of con­fi­dence in gov­ern­ment will un­der­mine in­vest­ment, the econ­omy and Le­sotho’s well­be­ing.

Dr Ma­joro was De­vel­op­ment Plan­ning min­is­ter in the pre­vi­ous gov­ern­ment.

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