NOUAKCHOTT, July 16, 2010—Mauritania is home to some 30 state-owned enterprises (SOEs), companies owned by the government that deliver vital services like electricity, water and gas to households. SOEs also provide employment and infrastructure in this West African nation.
But such enterprises are facing low profitability and are straining the national budget, according to experts. The reasons: lack of sustained financing, politicization of management positions, breakdown of internal controls, and cumbersome administrative procedures.
SOEs were the subject of a recently released report from the World Bank, written as part of a project designed to promote improved governance of SOEs in Africa. Titled “The Governance of State Owned Enterprises,” the report highlights a study conducted between 2007 and 2008 by a team from the Bank’s Private Sector unit. The team studied 10 local Mauritanian SOEs, as well as SOEs in other francophone African countries.
“The study sought to compare local experience with “best practices,” especially those cited in the OECD (Organization for Economic Co-operation and Development) guidelines, and make recommendations for bridging the gaps,” said Haroune Sidatt, an operations analyst at the World Bank in Nouakchott, where the Bank shared the report with members of the public on June 16.
“Although privatization is often synonymous with greater efficiency, countries are increasingly adopting blended approaches in which governments sign performance contracts with SOEs, who then operate as private enterprises and improve their governance,” Sidatt said.
The report also highlighted the need to improve legal and regulatory frameworks, in order to ensure fair competition with the private sector, as one of the bottlenecks preventing SOEs from properly fulfilling their mandate. The report questioned the state monopoly and the preferential tax or customs advantages granted to some SOEs to the detriment of others.
It also questioned the dual commercial and social roles played by SOEs, which often enable Mauritanian state authorities to bypass boards of directors and government agencies on social policies and operational decisions, which, authors claim, is detrimental to the performance of enterprises and the spirit of competition.
The report recommended that states seeking reform take the following measures:
- Establish government institutions to regulate and supervise SOEs;
- Mandate that government officials and SOE technical and financial executives report to the public and parliament;
- Adopt a merit-based system that appoints managers based on their qualifications and not political affiliation;
- Require performance evaluations for top SOE executives;
- Improve government and citizen oversight by involving civil society and encouraging public discussion;
- Bring key SOEs into compliance with international standards.
Regulations on communication and transparency, which are necessary tools for encouraging better governance of enterprises, are currently being drafted in several countries, especially in markets where companies have active shareholders, an enterprising press, strong consumer associations, and effective regulatory institutions. In Mauritania, no requirement for communication to the public has been fulfilled. The report notes that access to information, or the publication of comprehensive reports, is irregular in Mauritania, where the last report on SOEs was produced in 2005.
Many governments around the world have taken steps to improve the performance of SOEs, but Mauritania still has a way to go on reforming, according to Sidatt and others.