Commercial SOEs should make a profit – Jooste

Windhoek-Commercial public enterprises should make a profit, not only to sustain current operations but also to be able to re-invest in the company.

However, for a commercial public enterprise the profit motive may not necessarily be over-riding as national economic and social interests should be considered in the company strategy compared to pure profit maximisation.

This is according to Minister of Public Enterprises, Leon Jooste, who issued a statement this week to set the record straight following a debate triggered by what he said on Monday last week during a public lecture at the University of Namibia.

Most contributors to the media debate were dumbfounded that a minister put in charge of the transformation of the ailing public enterprise sector could make a statement that public enterprises do not have to make a profit. Correctly so, as he did not, his statement reads in part.

He added that he expects commercial public enterprises to do more, if not much more, with less.

During the public lecture, Jooste, when speaking about Air Namibia, said there are only a few national airlines in the world that make consistent profits.

And while Air Namibia cannot be expected to post a profit in the short-term, it should significantly reduce the losses � and move towards a break-even, and eventually a profit situation, within an acceptable time, said Jooste.

This, he added, is also exactly the reason why his ministry has agreed with the Air Namibia board and senior management to work together and take a relook at the company's business model.

Jooste emphasised that Air Namibia's financial status is not sustainable and that his ministry is concerned about the company's outlook in the global competitive space in which it operates.

Profits can be paid out as dividends to the State but also withheld to replace assets and invest back into the company to keep up with industry standards and global competition. A company cannot be self-sufficient if it only breaks even. The State should only come into the picture possibly for major new projects that will strengthen and grow the company. The commercial public enterprises are companies and not glorified subsidised entities, said Jooste.

The public enterprises minister pointed out that there are, however, subtle differences between various commercial public enterprises in line with the sectors in which they operate and this is where the misunderstanding or misinterpretation often occurs.

He explained that national utilities, Namwater and Nampower, should not be pushed to generate too high profit margins. If we do that, it will mean that the tariffs have to be escalated, which will affect both household and industrial consumers and will affect the country's competitiveness, as an investment destination, and stifle industrialisation efforts.

Then we have a category of public enterprises operating within mature economic sectors like Namibia Wildlife Resorts in the tourism sector. There is no reason why this company should not generate sector-related profits and in a case like that we should demand such profit margins, Jooste remarked.

Source: New Era Newspaper Namibia