Governments all over the world embark on some level of commercial activities. Governments are seen participating in many areas such as the provision of utilities, manufacturing, education, natural resource extraction, and trade among others.
This participation in such commercial ventures is aimed at protecting citizens, businesses, and industries to propel economic growth and development. In essence, the involvement of the government in commercial activities is often considered a strategic pillar for national development.
There are various levels of participation by states in commercial activities with each accompanied by its nuances. However, the two broad participation levels are fully owned and operated enterprises and partial ownership. Partial ownership can also be broadly categorised into majority-owned with controlling interest and minority-owned.
The impact of these levels of ownership is a mixed bag. While some fully-owned state entities perform better, others have been a total failure. The same is true for partly-owned state enterprises.
Ghana’s case isn’t different. The performances of some enterprises with state interest over the years have been abysmal while others have performed creditably well.
To optimize the gains made from the state’s involvement in commercial activities, the Chairman of the Parliamentary Committee on Public Administration and Member of Parliament for Pru East, Dr. Kwabena Donkor has observed that given the track record of the country, a minimal stake without control interest is the best approach for Ghana.
Dr. Kwabena Donkor tells The High Street Journal that he is fully against any government of the country venturing into a fully-owned commercial enterprise.
This comment follows the Pru East MP’s call for the government to acquire a stake or ensure local participation in Newmont’s sale of its Akyem Mines. Although the mine has been sold to a Chinese mining company, the legislator believes the state as the sole owner of the asset can intervene to ensure local participation.
Even though there was an opportunity for the state to acquire full ownership of the mines, the former Power Minister noted that it would have been bad news given the country’s track record for managing fully-owned enterprises.
“I will not recommend 100% purchase. But I will recommend at least sizable equity. 30 to 40%,” he noted.
He argues that fully-owned enterprises in Ghana, over the years, have grappled with mismanagement, inefficiency, and political interference.
He said “the experience of this country is that the Ghanaian government has been poor at managing commercial operations. We had a state-owned gold mining corporation that ran so much losses that it had to be de-established. In other areas, we have had an experience of poor financial management of wholly-owned state enterprises. There is no need going for 100% when our track record is a bad one.”
In his considered view, Dr. Kwabena Donkor believes the best approach for the state is to opt for minority equity without controlling interest. He argues that comparatively, entities with minority stakes by the government have over the years performed better relative to fully owned state enterprises.
He explains that these entities with the state’s minority equity and without controlling interest are shielded from political interference by the state hence seeing better performance, innovation, and financial success.
“In the area of alcoholic beverages, our 100% state-owned company has run losses for seven years. So for our track record, it is not advisable. If you take SSNIT for instance, SSNIT will tell you they make most of their investment income from the entities that they don’t have a controlling interest,” he maintained.
He continued, “If you go to the website of SIGA and look at their 2023 state-owned enterprises report, you will find out that about 80% of the dividend income that has come to the Ghanaian state has come from entities the state does not have controlling interest.”
“When we own it fully, we have very poor corporate governance infrastructure. The way we appoint directors, the way we appoint chief executives; premium is not placed on sound commercial management. But where we have minority equity, they yield good money,” he emphasized to The High Street Journal.
Dr. Kwabena Donkor is convinced that it is not prudent and advisable that the sweat and toil of Ghanaians are put into 100% state-owned enterprises for the political and professional class to mismanage to the detriment of the people of Ghana.
