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Saturday, June 19, 2021

Reaction to the new draft constitution: Create a separate ministry for State-Owned Enterprises

By Dr. Alieu .O. Faal

Please allow me to applaud you and your team of dedicated commissioners for the brilliant work registered so far and for giving Gambians a document that could entrench positive legacies for the future of our country.

Let me say that by coming out I am not in any way pretending to be a constitutional expert challenging the threshold of legal experiences in your team, but as a concerned citizen who witnessed gross financial mismanagement across the state enterprises only to now sit down and do nothing would be a great disservice to this nation especially when we want to correct the mistakes and horrendous abuses of the past.

Having said that, I would like to make the following contributions concerning the proposed governance structures of the State Owned Enterprises (SOEs) in the new draft Constitution as well as making suggestion for the creation of a separate ministry for the SOEs to strengthen governance and improve oversight for a better service delivery :-
1. It is observed in the new constitution that public enterprises are now referred to as ‘State Owned Enterprises’ which is consistent with international practices. However, given the plethora of legal instruments individually establishing these institutions as Public Enterprises (e.g. the GNPC Act, the GAMTEL Act, the AMRC Act etc.), there is need to regularize all these separate Acts as well as the Public Enterprises Act 2013 in order to avoid any legal ramifications in the future.

2. Section 175 (1) of the 1997 Constitution defines SOEs as “enterprises where the State has significant control through full, majority, or significant minority ownership.” In the same vein, the OECD (The Organization for Economic Cooperation and Development) has a similar meaning for SOE and define it as “anybody corporate or other body or institution, wholly owned or controlled by the Government”.

3. Based on the above definitions, Government is the main shareholder and therefore owns the SOEs on behalf of the people. It therefore runs counter to the spirit of effective governance to give absolute power to the Chairpersons of the SOE Boards to hire and fire Chief Executives of public enterprises as indicated in Section 278 of the new draft Constitution which states, “The Chief Executive Officer of a State Owned Enterprise shall be appointed by the Board of Directors, through an open and transparent competitive process, following advertisement of the position, and subject to the approval of the National Assembly “.

4. While the board of directors and executive management are the agents employed by government to manage the SOEs on behalf of the people, ,the 1997 Constitution correctly stated that it’s the President of the Republic who should appoint both the board and the chief executive as follows: “section 175(3) The Chief Executive of a Public Enterprise shall be appointed by the President after consultation with the Board of Directors or other governing body of the Public Enterprise and the Public Service Commission. All other appointments to the staff of a public enterprise shall be made by the Board of Directors or governing body, or by some member of the staff of the public Enterprise appointed by the Board or governing body”. So why not maintain this section in the new constitution?

5. Furthermore, Section 278 of the draft Constitution should therefore be revised to reflect what economists referred to as Principal-Agent problem. Principals own the enterprise and appoint agents to manage it for them. So the board and its chairperson as well as the CEOs are agents appointed to serve the interest of the people. The role of the board is not to involve in day to day management issues, but to carry out functions of strategic guidance and monitoring of management. Also, all SOE boards have term limits of three years, this means that every time a new board is set up members would like to appoint a new CEO who can serve their own interests.

6. At the moment no specific legal instrument exists giving clear mandate to any government body the power to monitor the performance of the state enterprises. Section 280 of the new constitution is calling for the creation of an Act to establish a body to monitor SOE performance in order to promote efficiency, transparency and probity in all their undertakings. I believe the purpose and scope for this Act should be expanded reflecting the urgent need for a government ownership policy to provide a clear statement of the state’s policy and financial objectives as shareholder in each enterprise.

7. In addition, this will be designed to achieve more effective governance, better performance monitoring whilst ensuring board directors and management as stewards are held accountable for performance, timely submission of financial reports, effective management of resources and serving the citizen for the purpose of meeting SOE objectives and societal value creation.

In conclusion, the recently released audit report on the selected seven giant SOEs raised some serious governance and financial issues affecting the public enterprises. This further strengthen the case for a separate ministry responsible for SOEs to be created in the new constitution especially given the importance of the public enterprises in creating jobs, delivering public goods and services to the people.

One of the fundamental missions of the CRC is to create a clean document that will reflect the needs of all Gambians and help avoid repeating the same mistakes of the past into the future of this country. It is a noble mission and so far we are satisfied with your achievements.

Dr. Alieu .O. FAAL is an International Consultant and former Senior Resident Adviser on SOE matters at the Ministry of Finance and Economic Affairs.

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