PEGA ignites SOE reform

…as Jooste retraces Hybrid Governance Model steps

By Hilary Mare

FOLLOWING the activation of the Public enterprises Governance Act (PEGA) which brings into force, the Hybrid Governance Model for Public Enterprises, Leon Jooste, Minister of Public Enterprises has retraced steps his ministry had to go through to effectively implement the new model which he has termed the ‘most effective’.

The creation of the Hybrid Governance Model was approved by Cabinet in June 2016 and defines three categories of Public Enterprises: Commercial Public Enterprises, Non-Commercial Public Enterprises and Financial Institutions and Extra-Budgetary Funds.

“The logic behind this model is that although the centralization of ownership is the most appropriate governance model, it would be a mistake to centralize the ownership functions of all the above categories of Public Enterprises. One of the most fundamental anomalies we had to address in the design of the new governance architecture was to address the scenario where potential conflict of interests existed in cases where some authorities (Ministries) had complete control over all policy formulation, regulatory functions and implementation within a certain sector.

“This created fertile ground for possible unintended uncompetitive behavior and might have influenced the slow liberalization of certain sectors of our economy. In the Hybrid Governance Model only the ownership of the Commercial Public Enterprises are centralized while the other two categories remain in a dual governance model where the Ministry of Public Enterprises will set corporate governance guidelines that they must adhere to while the typical functions associated with ownership will remain with the various Line Ministries,”Jooste said last week adding that his ministry is confident that this will result in improved corporate governance that will in turn lead to higher efficiencies and performance while the model effectively separates the functions of the State as policy formulator, regulator and implementer/operator.

He further stressed that a suitable legal solution had to be identified to allow for the implementation of this governance model and this proved more complicated than initially anticipated due to the potential legal implications related to multiple existing statutes.

“Therefore, the Ministry decided to consolidate the previous Act and its amendments (2006, 2008, 20015 and to integrate the Hybrid model into one law. The Public Enterprises Governance Act, 2019 is the outcome of this process and following its promulgation in 2019, I agreed to operationalize it by notice in the Government Gazette,” he further said.

One of the key highlights of this new Act is that a person will only be allowed to serve on two boards of Public Enterprises.

“The successful implementation of the new Hybrid Governance Model and the reform of our Public Enterprises will only be possible if we approach this collectively. The successful reform of our Namibian public enterprises is a non-negotiable element that has become critical to ensure that the current economic downturn is countered as soon as possible. I believe that economic recovery will be all but impossible without calculated but expedited public enterprise reforms to increase profitability, contain and minimize subsidies and to entirely cease bailouts as soon as practical,” rallied Jooste.

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