Corporate governance expert and former power minister, Dr. Kwabena Donkor, has backed the government’s travel ban on boards of state institutions amid the rising costs in the SOEs sector.
Despite the support, he believes a nuanced directive that allows commercially run, profitable state companies to still have the flexibility to make business decisions in the interest of the company will not be out of order.
Speaking in an exclusive interview with The High Street Journal, Dr. Donkor explained that the directive by President John Dramani Mahama to curb travel costs across state institutions is justified.
He, however, continued that it is important to distinguish between traditional public sector bodies and state-owned commercial companies. According to him, it is unfortunate that many Ghanaians treat all state-linked entities under the same metrics, creating confusion about how some commercially run organisations are expected to operate.
“I’m fully in support of the travel ban on SOEs and public sector institutions,” he emphasized, adding that, “There is some confusion in the minds of Ghanaians as to what a state-owned enterprise is. Too often, in the minds of the average Ghanaians, entities that are not enterprises are included in the public discourse as state-owned enterprises.”
Understanding What a True State Enterprise Is
Dr. Donkor said many Ghanaians often describe every government-related institution as a state-owned enterprise, but that is not accurate.
He explained that regulatory agencies such as the National Petroleum Authority, Petroleum Commission, and Energy Commission are not enterprises in the true business sense.
He said these are regulators and they are not businesses set up to make profits. In contrast, he said some entities were deliberately established to operate as commercial organisations even though they are owned by the state.
“A number of the SOEs do not belong to the public sector. That distinction must be clear,” he said.
He added, “For example, the National Petroleum Authority, the Petroleum Commission, and the Energy Commission. These are not enterprises in the truest meaning of the word.”
Commercial State Companies Operate Differently
Dr. Donkor pointed out that a number of government-owned companies were set up to function like businesses.
He gave examples such as the Volta River Authority, Electricity Company of Ghana, Ghana Water Company Limited, and the Grid Company of Ghana. However, he was quick to add that these organisations operate in regulated sectors and cannot freely set their prices. Irrespective of the regulation, they are still structured to run as enterprises.
Others, he noted, were incorporated as companies under corporate law, such as Consolidated Bank Ghana, which is fully owned by the state but structured as a limited liability company.
Because of this structure, he said their governance and decision-making processes are closer to those of private companies.
Why Some Companies Need Commercial Flexibility
Dr. Donkor said when a state-owned company is profitable and not dependent on government funding, it should be allowed to make decisions that protect its commercial interests.
He cited that, for example, if executives need to travel urgently to close an international transaction, he said the board and management should be able to make that decision in the interest of the company.
However, he was emphatic that this flexibility should only apply to companies that are financially independent and not reliant on government bailouts.
“I believe that commercial entities set up purposely as companies and making profits should be allowed to operate as commercial entities. Look, if there is an urgent need to go and close a transaction, let’s say in London, the chief executive and or the board chair or board representative should be able to take a commercial decision and travel in the interest of the company. That is on condition that the company is profitable and it is not dependent on government funds,” he indicated.
When Government Oversight Becomes Necessary
Dr. Donkor noted that government intervention is always justified when a company depends heavily on state financial support.
He cited the example of the Electricity Company of Ghana, which periodically receives financial injections from the government to sustain its operations.
In such cases, he said the Ministry of Finance has every right to exercise closer oversight because public funds are being used to support the company.
“In the peculiar case of ECG, because the state periodically injects money into its operation not as equity, then aspects of ECG’s governance will come under the purview of the Ministry of Finance,” he emphasized.
He added, “If I buy fuel for you because you cannot buy fuel, I have a licence to find out what your funds are being used for. Or to even set limits on you. So if the travel ban affects ECG, it is because it has become dependent on the government.”
The Bottomline
Ultimately, Dr. Donkor said the president’s travel directive is an important step toward promoting fiscal discipline across state institutions.
He, however, adds that companies that were created to function as commercial businesses and are generating profits without relying on government funding should, in his view, be allowed to take reasonable commercial decisions that help them grow.
Such an approach, he said, would protect public funds while ensuring that profitable state companies remain competitive and efficient.
