Dede Drives the Discourse: Episode 24: Can State Owned Enterprises Work?

Hello, my name is Dede Nyansapo. I am an entrepreneur who also participates in Accra’s burgeoning gig economy as a Dede. My love for meeting fascinating people and my curiosity about how they think usually places me in the midst of some very entertaining conversations. Invariably, these conversations lead to some key learnings that may be useful to anyone on their business journey.

Episode 24: Can State Owned Enterprises Work?

August 8th 2024: As I pulled up to the curb at the behest of the mobile app that has now become my perpetual guide and instructor,  I greeted my passenger with a friendly, “Good afternoon, Sir ! Heading to the Movenpick Ambassador Hotel for the Ghana Economic Forum?”

My passenger settled into the backseat, adjusting his briefcase. “Yes, that’s right,” he replied. “I work for an international organisation focused on helping African countries reduce poverty and improve their economic prospects.”

That piqued my interest. “That sounds like important work,” I said as I started driving. “I’ve been thinking a lot about how African countries can improve their economic situations. Do you think state-owned enterprises (SOEs) play a role in this?”

“Absolutely,” he responded, nodding. “State-owned enterprises can be crucial for economic development. They often serve as vehicles for implementing strategic national policies and can drive growth in key sectors like infrastructure, energy, and transportation.”

“Can you give me some examples of how SOEs have helped countries improve their economies?” I asked, eager to learn more.

“Certainly,” he said before pausing thoughtfully. “One prominent example is Singapore. The government there established Temasek Holdings, a state-owned investment company, which played a significant role in transforming Singapore from a developing nation into a global financial hub. By strategically investing in various sectors, Temasek contributed to rapid economic development and poverty reduction.”

He continued, “Another example is China. The Chinese government used state-owned enterprises to spearhead industrialization and infrastructure development. Companies like China National Petroleum Corporation (CNPC) and China Mobile helped build critical infrastructure and contributed to economic growth, lifting hundreds of millions out of poverty over the past few decades.”

I was thoroughly impressed yet eager to hear about African examples. “Those are some wonderful examples. What about African countries? Have there been successful cases here too?”

He nodded. “Yes, there have been successes in Africa as well. For instance, Ethiopia’s state-owned Ethiopian Airlines is a notable example. The airline has been a major contributor to the country’s economy, facilitating trade and tourism. It has grown to become one of the largest and most profitable airlines in Africa, which has a positive impact on the nation’s economy.”

“Another example is Botswana,” he continued. “They successfully used state-owned enterprises like Debswana, a diamond mining company jointly owned with De Beers. The revenue from diamonds has been strategically reinvested into education, health, and infrastructure, significantly improving the standard of living and contributing to sustained economic growth.”

“Those are interesting examples,” I said, nodding. “But I’ve also heard that some countries have struggled with their state-owned enterprises. Why do you think that is?”

He sighed. “There are several reasons why state-owned enterprises might fail to deliver the expected results. One major issue is mismanagement. Without proper oversight and efficient management, SOEs can become bloated, inefficient, and prone to corruption. For instance, many SOEs in Venezuela have suffered from significant inefficiencies and corruption, leading to economic decline rather than growth.”

He added, “Another problem is the lack of clear objectives and strategic direction. In some cases, SOEs are used as political tools rather than economic assets. When leaders prioritize political goals over economic efficiency, it can lead to poor performance and a drain on public resources. For example, in Zimbabwe, the mismanagement of state-owned enterprises has been a contributing factor to the country’s economic struggles.”

“It sounds like management and strategic planning are crucial for SOEs to be successful,” I said thoughtfully. “What do you think needs to happen for African countries to make the most of their state-owned enterprises and use them to reduce poverty?”

“There are several key steps that can help,” he replied thoughtfully. “First, transparency and accountability are essential. State-owned enterprises need to operate with a high level of transparency and be accountable to the public. This can be achieved through regular audits, clear reporting, and involving civil society in oversight.”

“Second, effective management is critical. SOEs should be run by professionals with the expertise to manage them efficiently. This often means separating political appointments from management positions and ensuring that leaders are chosen based on merit.”

“Third, strategic planning is vital. SOEs should have clear objectives aligned with national development goals. Governments need to set priorities and ensure that SOEs contribute to these goals in a way that supports overall economic development.”

“How can citizens play a role in holding their leaders accountable for the management of state-owned enterprises?” I asked, genuinely curious.

“Citizens have a crucial role to play in promoting accountability,” he said enthusiastically. “First, civic engagement is key. People should be actively involved in discussions about how state-owned enterprises are run and how resources are allocated. This can include participating in public forums, attending community meetings, and engaging with civil society organizations.”

“Second, there should be mechanisms for public accountability. This includes having access to information about the performance and management of SOEs. Freedom of information laws and platforms for reporting corruption or mismanagement can empower citizens to hold leaders accountable.”

“Third, encouraging a strong and independent media is important. The media can investigate and report on the activities of SOEs, highlight issues of mismanagement or corruption, and keep the public informed. This helps create a culture of accountability and transparency.”

“It seems like a combination of effective management, strategic planning, and active citizen involvement are all crucial for the success of state-owned enterprises,” I remarked.

“Exactly,” he agreed. “When these elements come together, state-owned enterprises can become powerful tools for economic development and poverty reduction. They can drive growth, create jobs, and improve infrastructure, ultimately contributing to a better quality of life for citizens.”

I nodded. “I see. So, it’s not just about having state-owned enterprises, but also about how they are managed and how the public engages with them.”

“Absolutely,” he said. “The potential for SOEs to contribute to economic development is significant, but realizing that potential requires a commitment to good governance, transparency, and public involvement.”

“Are there any specific strategies or policies that African countries can implement to improve the performance of their state-owned enterprises?” I asked, wanting to know more.

“Yes, there are several strategies that can help,” he replied enthusiastically. “Implementing performance-based management systems can drive efficiency and effectiveness. This involves setting clear performance metrics and linking them to incentives for managers.”

“Another strategy is to encourage public-private partnerships. In some cases, involving private sector expertise and investment can improve the performance of SOEs while still retaining public ownership. This approach has been successful in various countries, allowing SOEs to benefit from private sector efficiencies and innovations.”

“Additionally, focusing on capacity building is important,” he continued. “Training and developing the skills of employees and managers can lead to better management practices and improved performance. This includes investing in professional development and ensuring that SOE leaders have the necessary skills and knowledge.”

“Those are some practical strategies,” I said, impressed. “It sounds like there’s a lot that can be done to ensure that state-owned enterprises are effective and contribute to reducing poverty.”

“Definitely,” he agreed, smiling. “With the right approach and commitment, state-owned enterprises can play a significant role in economic development. It’s about harnessing their potential and ensuring that they operate in a way that benefits the entire nation.”

“I appreciate the insights,” I said as I turned onto the road leading to the hotel. “It’s clear that while there are challenges, there are also many opportunities for improving the role of state-owned enterprises in Africa.”

“Yes,” he nodded. “And it’s important for everyone involved—governments, citizens, and international organisations—to work together to address these challenges and make the most of the opportunities.”

“Thanks for sharing all this information,” I said, pulling up to the hotel entrance. “It’s been really enlightening to hear about the role of state-owned enterprises and what can be done to improve their impact.”

“You’re welcome,” he said, smiling as he exited the car. “I’m glad I could provide some insight. It’s important to have these discussions and keep exploring ways to make a positive impact.”

“We’re here at the Movenpick Ambassador Hotel,” I said, smiling. “I hope the forum goes well and that the discussions there can help drive positive change.”

“Thank you,” he responded,. “I’m hopeful that the forum will generate valuable ideas and solutions. It’s an important step in the ongoing effort to improve economic development in Africa.”

“I’m sure it will be,” I said, waving goodbye.

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