If one asks what Public Enterprises are, perhaps, they can have the response ‘they are organizations/companies owned and controlled by the government and established in a bid to provide citizens with a number of invaluable services and promote economic growth as well as comprehensive development at national level.
Appraising the Ethiopian context, The Ethiopian Herald would like to jot down some important points about public enterprises taking advantage of a certain event it of late partook.
Public enterprises can play a significant role in earning foreign exchange for Ethiopia, in booming the tourism and hospitality sector via attracting foreign tourists and generating revenue in foreign currency. Similarly, they have engaged in the export of goods and services and again help the nation earn foreign exchange by selling their products and services to countries of overseas.
Public enterprises can also generate employment opportunities for a number of citizens as too many citizens are actively engaging in a number of undertakings. Yes, they require a large workforce to carry out their operations, and hence they can provide employment opportunities for a significant number of additional people as they can create indirect employment opportunities by supporting local businesses and suppliers.
Unequivocally, public enterprises are of paramount importance in promoting regional development by investing in economically disadvantaged parts of the nation, too. They can thus invest in the development of infrastructure, healthcare facilities, power generation, transportation, as well educational amenities across the nation with a view to bringing about wide-ranging growth and development.
In so doing, they have been contributing a lot to foreign exchange earnings, infrastructure development, employment generation, regional development, and social welfare, among others. The most crucial public enterprises in Ethiopia have lately come together and formed a giant hub so as to get power together and be administered in a similar national framework. This giant hub of the public enterprises, predominantly the nine ones, is termed as Public Enterprises Holding and Administration (PEHA).
Recently, PEHA organized a forum to discuss the 2023/24 performance of a range of public enterprises, that of its nine members, as stated earlier. Upon completion of presentation of papers talking about the ways of running activities, the means the respective public enterprises have employed to be competent and profitable, the potential challenges they have faced so far, the mechanisms they have been using to address the trying obstacles, and way forward to work together by advising each other/one another.
Member enterprises were presenting their respective performance, challenges and ways they have employed to hit problems. They also elucidated the journey they have been trekking through a seemingly SWOT (strengths, weaknesses, opportunities, and threats) analysis. The nine enterprises which are Development Bank of Ethiopia, Ethio-Engineering Group, Ethiopian Postal Service Enterprise, Ethiopian Electric Power, Ethiopian Railway Corporation, Industrial Parks Development Corporation, National Veterinary Institution, Ethiopian Industrial Inputs Development Enterprise, and Liability and Asset Management Corporation had presented their Strengths, Weaknesses, Opportunities and Threats.
A range of questions, suggestions, constructive comments were also highly entertained and fruitful discussion was also held to help the enterprises draw important lessons from one another for better performance. On the occasion, PEHA Director General, Habtamu Hailemichael stated that public enterprises which were in a state of being wreck are making profit and even carrying out activities to rescue others from being relinquished, create job opportunities, and are contributing their own share in driving the wheel of the national economy well.
According to the Director General, the impact of public enterprises or state-owned enterprises on economic growth in Ethiopia has these days been a crucial driver of the economy of the nation. True, several possible channels through which the enterprises would play a pro-growth role including stabilizing growth in economic downturns by carrying out massive investments; promoting technical progress by investing in technology, following a high-road approach to treating workers by paying a living to move toward a more sustainable growth model in the future. The effort to make the enterprises competent, profitable as well as modern via establishing well-defined corporate governance and corporate finance system has prevailed now.
He also stated that, making public enterprises up-to-the-minute, lucrative and proficient has been prioritized and given due emphasis to help the nation benefit out of various sectors as it deserves.
He added that, bridging gaps witnessed in due course of running a multitude of activities in various public enterprises has now been well focused to help them capable of overcoming challenges in particular and helping the nation come up with meaningful change in general.
The government has been working hard to make the public enterprises energetic and globally competent ones. Public enterprises have played an important role in bolstering Ethiopia’s economy. A series conditions have to be met in order to transform potential profitability into sustainable and rapid economic growth, among which increasing productivity, improving technology, and building capacity of the labor power are most important.
“Public enterprises can promote the national economic growth as they maintain and raise investments, stabilize economic growth and reduce the damage of economic downturns, carry out major technical innovations that private enterprises are reluctant to do, which fosters economic growth and prosperity.”
To investigate the pro-growth role of public enterprises, it is better to boost technical progress and it is noteworthy that these projects were not only of scientific importance but also of economic importance aiming at reducing transportation costs, ensuring energy supply, or enhancing productivity, all of which may contribute to the economic growth at national level, he added.
As to him, major innovations help enhance national competitiveness and bring benefits to the enterprises in particular and to the country as a whole. Since poor working conditions and meaningless long working time have intensified capital-labor conflicts and undermined social stability, working in a collaborative manner would pay off.
Such daunting challenges were thoroughly discussed and all participants of the member enterprises forwarded a range of constructive ideas and lucrative means to make real difference, the Director General stated.
There are a number of reasons to expect public enterprises to contribute to economic growth. With regard to the role of an economic stabilizer, given the mutual causality between/among public enterprises and economic growth, participants observed that some of PEHA member public enterprises seem to have lower growth when compared to achieving their annual plan but with promising trends to record change and progress in the future.
He further stated that, a multitude of reforms have been applied on many public enterprises with a view to unraveling limitations to correct and strengths to further reinvigorate thereby making the enterprises proficient and rewarding to help the nation meet its vision in turn—dramatically reducing poverty—at the end of the day.
He said, “Public Enterprises would play a paramount role in creating job opportunities, enabling the nation secure foreign currency and being competent with counterpart ones from overseas. However, a lot remains to be done to enable the country to be in a position towards seizing the ladder of success in all aspects.”
As to Habtamu, closely looking into drawbacks, discussing cardinal concerns revolving around public enterprises as well as devising possible solutions to the problems all enterprises have been encountering is an incomparable avenue to rightly lead the nation and come up with the required progress in the years to come.
According to Habtamu, France Development fund (Agence Française de Development Group (AFD) has played a vital role in terms of helping PEHA in due course of publishing and providing it with expertise and technical support, and so has House of people’s representatives. Their support has thus been instrumental in encouraging public enterprises overseen by PEHA. All the enterprises have been sharing experiences, implementing modern systems and the way they have respectively appreciated to be profitable in the future.
As to him, public enterprises are duty bound to and working hard to promote job creation, expand corporate social responsibility, and generate foreign currency, among others.
Development Bank of Ethiopia President, Yonahhes Ayalew (PhD) on his part said that the bank is a policy bank predominantly financing investment and agriculture sectors.
He said, “Ethiopia’s economy does show a huge investment demand these days and the manufacturing sector has taken the lead. Small and Micro Enterprises (SMEs) have also made immense contribution to the national economy in general and in creating job opportunities and fair market distribution in particular amid hurdles that need to be well met.
He further said that the performance of various sectors peculiarly the lease financing has shown remarkable progress though there is a long way to go in a bid to make real difference in all aspects at national level.
In a nut shell, public enterprises face various challenges and problems that hinder their effectiveness and efficiency despite their importance. Some of the common problems of public enterprises cited during the discussion including poor technology, land grab, shortage of foreign currency and inputs, have to be well addressed if the country is to make optimum benefit out of its public enterprises. As these problems often result in low productivity, poor service delivery, financial losses, a holistic approach that involves focusing on the execution of established moderns corporate governance and finance systems and improving productivity, providing adequate funding and resources, needed to be well underscored, indeed!
BY MENGESHA AMARE
THE ETHIOPIAN HERALD TUESDAY 6 AUGUST 2024
