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Government plans to privatise parastatals

By Silindzelwe Nxumalo

The government of the Kingdom of Eswatini has agreed on an outline to privatise some of its State-Owned Enterprises (SOEs). These are the Pigg’s Peak Hotel, EswatiniBank, the Airport Operations of the Eswatini Civil Aviation Authority (ESWACAA), Eswatini Railways and Royal Eswatini National Airways Corporation (RENAC).

This already adopted plan by the current Cabinet was revealed by the World Bank in its report titled ‘Eswatini Economic Update’ Raising the Game with Efficient State-Owned Enterprises.

“The government authorities recognized the importance of Eswatini Public Enterprises (EPE) reform and the EPE restructuring framework adopted by Cabinet in 2021 aims to improve their effectiveness and enhance the business environment,” reads the report in part.

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The report went on to say: “The framework’s measures included privatizing the Pigg’s Peak Hotel and Casino, Eswatini Bank, the airport operations of the Eswatini Civil Aviation Authority, Eswatini Railways, and the Royal Eswatini National Airways Corporation.”

However, the World Bank observed that the implementation of the EPE framework has been slow and one reason could be that the strategic role of each EPE needs to be evaluated more carefully against the backdrop of the political economy in the country and in each sector.

The report stated that such an evaluation should also account for new technologies (renewable energy, desalinization, and smart water markets) and new demand from consumers who were becoming more ecologically aware.

“These changes will affect energy and water prices; they will also lead to more decentralized markets where new companies can challenge the dominant commercial SOEs, which benefited from natural monopolistic power (based on the economies of scale),” reads a part of the report.

The report further revealed that the revolution in global infrastructure is both technological and financial and new investors were emerging, such as international and local pension and infrastructure funds, and blended instruments were increasingly used to de-risk projects.

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“To help reconsider the role of commercial SOEs and EPEs in Eswatini’s economy, this report proposes three directions, which should be seen as suggestions to promote dialogue in the country and support policymakers,” reads the report.

According to the report, these directions were rethinking the state’s role in the economy, Strengthening the legal framework to include a clearer definition of commercial SOEs, separate from regulatory agencies and Strengthening EPE governance and oversight.

“When rethinking the state’s role in the economy the government should consider an EPE or SOE ownership policy that explicitly includes a clear rationale for maintaining state shareholding in them. As a shareholder, the state would have to carefully evaluate the costs and benefits of public ownership,” reads the report.

It further mentioned that government could also revisit the opportunity cost of providing grants and equity to EPEs and SOEs, at the expense of other needed investments and another strategic consideration could be opening markets to other operators, notably in energy generation and water distribution, which could promote competition and innovation and generate substantial benefits for end users.

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For the second direction, the report stated that Eswatini’s broad definition of EPEs included entities that were not enterprises, and this could be revised in line with the internationally accepted definition of SOEs.

“Also, a separate law is needed to govern independent regulatory agencies, as their functions differ substantially from those of enterprises. The legal and institutional structure of SOEs does not provide the powers and independence needed to carry out these functions. Finally, the commercial and regulatory functions of commercial SOEs should be split into separate entities,” reads the report.

In the last direction, the world bank suggested actions in this regard which included improving the monitoring and disclosure of equity stakes held by the state, instituting clear and merit-based guidelines for the appointment of board members, and requiring greater transparency of information to enhance accountability and oversight.

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