National budget 2015/2016
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.
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-
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.