Business Analyst - September 16

Thursday, September 16, 2021
TECHNOLOGY
How SIGA is striving to improve
corporate governance in SOEs
The recently
established State
Interest and
Governance
Authority is making
genuine efforts to
change the way
Ghana’s SOEs are
managed for the
better. TOMA
IMIRHE examines
what it is doing in
this regard and the
challenges it is
facing.
aN intense new focus on
state-owned enterprises by
government through its
recently established state
Interest and Governance
authority (sIGa) last week culminated in
the announcement of efforts, in
consultation with relevant stakeholders
to develop a “Good Corporate Governance
Code” for state Owned enterprises. this
new initiative suggests that the
transformation of the erstwhile state
enterprises Commission into sIGa a
couple of years ago goes far beyond a
mere change of institutional name.
Mr stephen asamoah Boateng, the
director-General of sIGa, said
inadequate governance frameworks and
procedures were critical contributors to
many specified entities’ poor financial
performance in Ghana hence the
initiative.
Last week a stakeholders’
consultation forum on the draft Code of
Corporate Governance for sOes which
has been drawn up under the auspices of
sIGa, was held in accra. the draft Code
has been designed to strengthen good
corporate governance practices for sOes
in order to improve the way they are
managed and ultimately how they
perform with regards to both impact and
finances.
However Mr stephen asamoah
Boateng, the director-General of sIGa,
was given a rude awakening to the sheer
size of the challenge he is seeking to
overcome – barely one third of the chief
executives of the sOes, whose inputs are
being sought into the Code, failed to even
turn up for the workshop, although since
the event was streamed live, they had an
excuse of sorts. But an anggry asamoah
Boateng, asserting that the sheer
importance of the event demanded their
physical attendance, consequently
publicly warned that CeO s who show a
lack of commitment to their corporate
governance responsibilities would lose
their jobs.
But the impunity with which some
sOes are run clearly illustrates the
underlying management difficulties
they face – in many cases board
appointments, including those of the
managing director are seen as rewards
for past political support or bribes for
anticipated political support going
forward. the resultant lack of regard for
duly constituted supervisory authority
subsequently seeps downwards from the
Board and top management.
this is, in part, the situation which
asamoah Boateng wants to correct,
pointing out that inadequate
governance frameworks and procedures
are critical contributors to many sOes
ultimate poor financial performance in
Ghana hence the initiative.
Last week’s forum was meant to
provide a platform for stakeholders to
offer feedback and input into the draft
Code, but the failure to attend it by the
majority of the CeOs shows a lack of
willingness to be reigned in by
adherence to a formalized, binding code
of corporate governance.
However, asamoah Boateng has
shown an understanding of the problem
and a willingness to try and address it, at
the forum he admitted that state
agencies are governed by a complicated
web of leaderships involving Parliament,
Ministries, regulatory Commissions,
Boards, and Managing directors or Chief
executives, all of whom have various
reporting responsibilities.
“this has muddled the division of
responsibilities and accountability for
performance, especially between the
Board and Management. In some cases,
Chief executive Officers and Board
appointments are made based on
political considerations rather than
merit, contributing to the
ineffectiveness of some Boards,” he
noted.
Indicating his determination to
curtail the inevitable shortcomings of
this situation he asserted that “we
cannot run state-Owned enterprises the
way we used to. If specified entities
continue to underperform, we will not be
deserving of our positions and
compensation.”
“It is simple to
make
recommendations
for how to proceed.
To effect change on
the ground, it takes
foresight, a lot of
hard effort, and a
commitment to
carry out policies at
all levels of the
economy’s decisionmaking,”
he said.
the director-General said sIGa was
required by section 4 (d) of its act (act
990) to develop a code of corporate
governance to serve as a framework for
specified entities’ actions and
performance.
He said although sIGa was the
driving force behind that endeavour, “we,
however, believe that to produce a
document that will stand the test of
time, a quality document that will be
owned and accepted by all stakeholders,
requires the participation and
involvement of all parties, hence the
need for this forum.
“It is simple to make
recommendations for how to proceed. to
effect change on the ground, it takes
foresight, a lot of hard effort, and a
commitment to carry out policies at all
levels of the economy’s decisionmaking,”
he said.
Past experience suggests that for the
initiative to work, the CeOs of sOes need
to be involved in its design as well as its
implementation. He recounted previous
instances where he had consulted some
CeOs on the law setting up sIGa, before
it was actually passed. according to him
most of them paid little attention to the
contents of the then impending law, only
to express surprise at its contents when
it was almost passed.
Last week’s workshop was held to
prevent such surprises. Finally, when
approved, the proposed code will impose
sanctions on non-performing
individuals and entities.
the draft code was drawn up largely
by Yamson & associates, the
management consultancy run by the
iconic dr Ishmael Yamson, a former
executive chairman of Unilever Ghana
and one of the most respected corporate
leaders in the country. the code seeks to
establish operating procedures which
will have to be adhered to by Boards and
managements of sOes and sets out the
relationship between the two as well as
financial authority limitations and
financial reporting requirements.
the latter will prove crucial. Finance
Minister Ken Ofori-atta in July this year
revealed that 47 sOes had failed to file
their annual financial statements to the
Finance Ministry in accordance with the
law. this was at an event to sign a
performance contract with the CeOs as
he revealed that at the end of 2019, a net
loss of GH¢586.4 million had been
recorded.
the 47 institutions have since 2016
failed to submit their annual financial
statements in flagrant contravention of
the Public Financial Management act.
Indeed, more staggering is the
revelation that only 14 out of the 126
sOes operating in the country responded
to the ministry’s directive to submit
their annual statements in 2019..
addressing Chief executives Officers
of sOes at a performance signing
contract, the Finance Minister said the
revelation highlights the need for a
renewed performance contract.
as of the end of 2019, an aggregate
net loss of ¢586.4 million was recorded in
the sOes sector, and this compares to a
loss position of ¢188 million in 2018.
Indeed between 2015 and 2019, sOes
have consistently posted negative
operating margins, averaging around
10%.
this suggests that generally,
operating expenses at state enterprises
are rising rather than revenues coming
in, a situation that does not signal a good
picture.
Mr Ofori-atta stresses that for the
country to recover from the impact of
the coronavirus pandemic, the state
enterprises must pursue aggressive
accountability, transparency and
responsible custodianship.
the performance contract, an
initiative of the state Interest and
Governance authority (sIGa), aims to
evaluate and assess the performance of
the CeOs.
President Nana akufo-addo is
hopeful the sOes can turn their fortunes
around by leveraging on five key pillars..
“streamlining government oversight
of the sOes sector, piloting corporate
governance improvement, government
on-lending policy, credit risk assessment
and rationalizing compensation, as well
as salary structure in the sector, are the
key issues government is pursuing”, the
President stresses.