Ways of Successfully Managing a Public Enterprise

8/14/2019 Ways of Successfully Managing a Public Enterprise

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Ways of successfully managing a Public Enterprise

INTRODUCTION

A public enterprise is a state-owned business that is in the public

sector of an economy. It does not aim to make a lot of profit if

any, but is responsible for providing health care, education and

other basic necessities for the general public as a whole and are

not required to make a profit but to provide a certain standard of

these services within a budget.

Since independence, numerous State Owned Enterprises

(SOEs), also Public Enterprises (PEs) were created in Sierra Leone

to address market deficits & capital short-falls, promote economic

development, reduce mass unemployment and/or ensure national

control over the overall direction of the economy. By providing

capital and technology to strategic areas where the private sector

either shied away from or lacked the capacity to invest (such asWater Supply, Electricity supply etc), Government resorted to PEs

to increase capital formation, produce essential goods at lower

costs, create employment and generally contribute to the

economic development of the nation state. This trend continued

till the early eighties.

However, rising corruption, management inefficiencies,overstaffing (without due regard to their economic viability, many

PEs became an easy conduits for job creation and a convenient

vehicle for patronage distribution), inflation and rising current

account deficits of the 1980s, exposed serious government


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failures and the limits of PEs as major players in economic

development. In addition to management deficits these PEs also

suffered from technological shortcomings. Imported through

either foreign aid or soft loans from abroad, many of the PEs were

either equipped with low or second grade machineries

contributing to low capital/output ratio, or were established

without due regard to their economic and financial sustainability.

CASE STUDY (Guma Valley Water Company)

Using Guma Valley Water Company as a case study, massive

migration into Freetown both during and after the war has

rendered the existing supplies inadequate. Also, the Guma Dam

was designed for 650,000 consumers the current population

served are in excess of 800,000. In this context developing

settlements such Calaba Town, Hill Station, Malamah and the

Peninsula area cannot be adequately served. The company has

put plans in place to avoid a repetition of the 2004/2005 water

crisis. In this vein, the peak supply rate from the treatment works

during the dry season has been reduced from 21 mgd (million

gallons per day) to approximately 18 mgd. This reduction in

supply coupled with the loss of some other sources of water

resulting from deforestation and pollution, such as at Hill Station

and Barham Road, and the reduced flow from the Thunder Hill

source in addition to the recent population explosion have

consequently compounded the water supply situation in

Freetown. Operations are stifled due to low budgetary provision.


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The neglect of this division over the years has led to a number of

constraints chief of which are:

Lack of adequate personnel

Lack of current data for proper water resource management

Inadequate funding of programmes

KEY ISSUES OF A PUBLIC ENTERPRISE

Population is increasing in urban areas therefore increases the

demand for the enterprises goods/services

Government are hesitant to allow for tariffs which is based on

full cost recovery but at the same time do not want to be seen

to violate IMF conditions of avoiding subsidies to make up for

the difference in the loss of revenue by the industry in this

public enterprise.

Due to inadequate skilled staff to serve it greatly affects the

authority to manage, maintain and forecast.

Due to the absence of controls and regulation on the

resources including no national standards or policy in place

for the exploitation and distribution of the products and

services, the board establishment must be implemented.

Mismanagement of funds and other tangible resources may

lead to high maintenance and repair costs.

HOW TO SUCCESSFULLY MANAGE A PUBLIC ENTERPRISE


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Operations of a public enterprise should be considered a matter of

national security and in the process establish a Monitoring, Research

and Development unit to assess issues like:

Fraud and corruption:The Public enterprise will need a vibrant

Board of Directors involved in no more than reviewing and

consolidating existing policies and practices in relation to risk

management, codes of conduct, reporting mechanisms,

investigation, training and awareness. The Public enterprise

should maintain high standards of ethics, conduct and fiduciary

responsibility. Having a clear overall policy that demonstrates the

companys resolve to combat fraud and corruption wherever it is

found.

Conflict of Interest: Perform their duties in a fair and unbiased

way, and that the decisions they make are not influenced by self-

interest, private affiliations, or the likelihood of personal gain or

loss. Public enterprise should protect the public interest by

ensuring that private interests that conflict with it are identified

and managed effectively. Public enterprise can best fulfil their

public duty by putting public interest first and carry out their

prescribed official duties fully and effectively within established

ethical standards and framework while identifying any actual,

perceived or potential conflict of interest.

Human Resource Development (HRD) : Establish a coherent

and comprehensive HR policy framework consistent with its

broader development and investment strategy policy framework


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responsive to new economic developments. Ensure they attract

and retain people who will add value to the business, therefore, it

is imperative for the public enterprise to plan meticulously and

reward carefully.

Competitive Environment : Changing the management system

within the public sector by introducing competition and involving

a broader range of suppliers may often improve service provision

and cost efficiency. The public enterprise must be riddled of its

monopoly and allow a competitive business environment which

will resultantly make it more efficient and business focused with

due regards to the vitality of the services they provide.

Macroeconomic Reform: A carefully planned privatization

programme would be an effective strategy for improving

operational efficiency, broadening share ownership, attracting

foreign investment and reducing the role of the state. Re-

organization of public enterprise into profit making commercial

ventures without subvention from the government.

For public enterprises to thrive, Government is required to divest

itself of any ownership, management, control or other interest it

may have in them, promote competition and improved efficiency.

Research must be conducted so that technology can be utilized

with a view of reducing costs, while the enforcement of current

laws to protect the properties of such institution should be

considered, while at the same time institute controls and

regulation on tangible resources including a national standard


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policy in place for the exploitation and distribution of products

and services.

Documents

Ways of Successfully Managing a Public Enterprise