Public Enterprises Have A Role In Economic Devt

22 Aug 2011

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DG BPE  Ms. Bolanle Onagorwa

Finally, Nigerians are gradually waking up from a long slumber and are beginning to discard an unworkable notion that public enterprises are evil. . The fake notion that Government has no business in business and the fundamentally flawed argument that the public sector should only play a regulatory role in the Nigerian economy is slowing evaporating.

Both public enterprises and private enterprises must play a complimentary role in the economic development of a mixed economy, the type we practice in Nigeria. Since the coming of the IMF (International Monetary Fund) unto our shores via the great IMF debate of 1985, Nigerians have learnt to demonize public enterprises, castigating them, facilitating their sale to cronies of government officials and using the channels of mass communication to impress upon the citizens that these enterprises are no good.

Under the President Ibrahim Babangida’’s government, the National Council of Privatisation and Commercialization, and its executive arm the Bureau of Public Enterprises (BPE) were set up and the use of these bodies for the fire sale of public enterprises was deepened by the Olusegun Obasanjo’s government until this day. Last week President Goodluck Jonathan, took a good look at the privatisation programme and declared that it has failed. Even now the Senate of the Federal Republic is probing a number of the privatisation transactions carried out by the BPE in previous years and what they will find will be mind boggling.

Indeed, the Senate will find that very viable public enterprises were sold to selected friends of government; that such private enterprises were deliberately undervalued and sold at give away prices; that many public enterprises were sold to private individuals who did not know what to do with them but ended stripping the assets; that corporate governance crisis was imported into some public enterprises to make them look ungovernable and amenable to easy disposal; and that the funds realised from the sale of many such public enterprises were looted.

The purpose of this article is not on the abuses of the privatisation exercise and exposing those who have benefited from their sale. My purpose is to reopen the debate on the place of public enterprises in economic development. A public enterprise is defined as an organisation set up and wholly owned by government or one in which government has majority shareholding. They can be broken into four groupings: public utilities, financial institutions, commercial and industrial companies and regulatory or service bodies.

In Nigeria most of the enterprises established on the attainment of independence were set up by either the federal government or the regional government and with the creation of states, many such enterprises were set up by the state governments. One major reason why commercial public enterprises featured predominantly in developing economies is because, at Independence their indigenes were either too poor and too unknowledgeable and so could not muster enough loan or equity capital to embark on major commercial projects.

At that point only the government had the clout to borrow in huge volume or/and make equity funding available to finance certain projects.  Quite often companies that transit into the post Independence era were those that the colonialists or their agents successfully established prior to independence. It was only government that had the muscle and the reach to attract management expertise to these companies at the time of their creation. 

Many natural monopolies in sectors such as telecommunications, power, and oil and gas could only be established as public enterprises. Again because of the barriers to entry such sectors as banking and other financial institutions, refineries, motor assembly plants, hotels, radio/TV could only be funded by government. In countries like China, India, United Kingdom, Indonesia, the Arab world, Brazil and Malaysia, these publicly owned companies were the forerunners of their industrialisation and many of these public corporations still exist to this day.

In Nigeria, many of the public enterprises started to mature in the early eighties; just 23 years after the country attained its republican status. Coincidentally, the maturation of these companies, coincided with the third world debt crisis that gripped Brazil, Argentina, Venezuela, Nigeria and the rest of the developing world in the early eighties and the IMF visited many of these economies with the destructive structural adjustment programme (SAP). While a number of these developing countries resisted the SAP, feeble ones like Nigeria couldn’t partly because of its military regimes that needed western acceptance and their poor knowledge of western neo-colonial entrapments.

The result was the acceptance of the IMF many conditions, including the privatisation of the public enterprises; in a country where the private sector was still fledgling and so not yet ready to assume such colossal responsibility.  The public enterprises themselves also gradually became a cesspit of corruption, incompetence, nepotism, graft, greed and poor management practises. Many of them were not monitored, their managers were chosen only in deference to their tribe and ethnic groupings and government officials were very comfortable converting these enterprises to their private estates.

But these evil tendencies on the part of public enterprises were the same the world over. However, whenever such poor practices were detected among managers of public enterprises in countries like China, India, Brazil, Malaysia or Indonesia, they were punished either by death sentence, life imprisonment, amputation, or very long jail terms that were complemented by debilitating fines. In Nigeria, our inability to enforce rules against corruption and petty theft carried out by public enterprise board directors’ and corporate managers led to the national acquiescence to dispose of them in any way whatsoever. But in the pre-war republic of Yugoslavia, it was the public sector organisations that catapulted the country into the best in the Eastern bloc and today many of the succeeding countries still depend on their public enterprises as manufactures of goods and services both for local consumption and for exports.  

There is a need to rethink the national approach to the existence, management and controls of public enterprises in Nigeria. For many years, this country has not been able to get private individuals to set up any refinery. The reason is that private companies in Nigeria neither have the funding nor the guts to undertake such responsibility. But these private enterprises can lift oil and trade.  Apart from power plants dedicated to supply power to a small community, no private effort has crystallised into supplying power to a state or a geopolitical zone.

In the same way, since the motor assembly plants like Volswagen, Steyr, Leyland etc were abandoned, not one private sector effort has been made to set up any. Even the steel plants sold to Nigerian concerns can only manufacture substandard iron rods and in the market today that explains why builders prefer to use iron rods imported from Ukraine or elsewhere when building. From what has become clear, any corporation, whether public or private, that does not have definite and verifiable long-term, short-term and tactical objectives and plans can only fail. The vision of every public enterprise is enshrined in its enabling act and for commercial concerns this vision is translated into the memorandum and articles of association and they must not be ignored if these enterprises must succeed.

A public enterprise can be managed exactly like a private enterprise with the exception that while a private commercial enterprise aims at profit maximization, a public commercial enterprise aims at either full cost recovery and/or a satisfactory profit. Because, the public enterprise is not too heavily tilted towards profit making; it ends up providing more employment than its counterparts in the private sector and its environment is healthier and less competitive.

A typical example today is the Nigerian Security Printing and Minting Company (MINT); with majority government ownership and the CBN Governor as Board chairman and managed under a first class private sector model and makes satisfactory returns to government. The Bank of Industry (BOI) owned fully by government is another successful public enterprise that is doing Nigeria proud.

It is not true that corruption, graft, nepotism and embezzlement only occur in public enterprises.  The recent experience with very big Nigerian banks and manufacturing companies in the private sector where corruption, poor corporate governance practices and mindless acquisition of personal wealth became the order of the day is an example of the abuses that private enterprises indulge in. The inventory manipulation reported in Lever Brothers Plc and a similar practice in Cadbury Nigeria Plc also a few years ago are examples of such bad practices in the private sector.

Similarly, the Nigerian private sector, apart from notable examples in selected sectors, is lacking in depth and is not able to perform beyond the level of poor training its staff are exposed to. Quite often private companies refuse to train their staff believing that training is a waste of resources but the public enterprise sees manpower training as an opportunity to develop the company, the staff and the nation’s economy. The federal and state governments must become more imaginative by setting up public enterprises to absorb the millions of unemployed youths in this country.

Selling off every government owned company will yield funds that will be corruptly pocketed by government officials. Since the various insincere attempts to sell the Nigerian Telecommunications Company (NITEL) have come to pass it may be best to retain the company under government control using the model of BT (British Telecoms) and/or AT&T (ATT) to manage it. Both BT and ATT are owned by the British and American governments respectively. With highly trained manpower roaming the streets jobless, a serious EFCC, ICPC and Senate performing their oversight duties; public enterprises can yet thrive.

•Chief Omokhodion, ex-MD/CEO Liberty Bank Plc, is a management consultant based in Lagos.

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