| WHY
DIVESTITURE? |
 |
Many state-owned enterprises (SOEs) have performed inadequately
over the years. Factors which have contributed to this include:
- over-staffing
- decision making at times being paralysed by excessive
bureaucracy and a laissez-faire attitude towards state business
- the lack of technical expertise
- the absence of the commitment and entrepreneurial direction
that private investors bring to business
- Low incentives for management and inadequate working
capital and investment in new plant and machinery, leading
to low capacity utilisation.
Accordingly, the Government of Ghana is pursuing a program
of divestiture of SOEs. The divestiture program is an ambitious
attempt to unlock the economic potential of Ghana by permitting
resources of people, money and technology to be put to their
best use and by increasing efficiency to achieve better living
standards for all. More specially, the program is intended
to reduce the size of the public sector and improve the performance
of SOEs by mobilising private sector management and capital.
This will reduce the financial and managerial burden on Government.
The state will be able more efficiently to manage the business
of Government, using the proceeds from sale of SOEs to improve
infrastructure, health service and education.
|
| WHEN WAS THE DIVESTITURE PROGRAM LAUNCHED? |
An SOE reform program was launched in 1988, as part of Ghana’s
overall Economic Recovery Program. The SOE reform program consists
of both measures to improve the performance of enterprises where
they remain state-owned and the rationalisation of the state
sector by means of the divestiture program.
|
| THE DIVESTITURE IMPLEMENTATION COMMITTEE |
The Government of Ghana established
the Divestiture Implementation Committee (DIC) to implement
and execute all Government policies in respect of divestiture
programs. Details about DIC are set in the Divestiture of
State Interests (Implementation) Law, 1993, (PNDC Law 326).
DIC’s functions under the law are:
- to plan, monitor, coordinate and evaluate all divestitures;
- to arrange for the effective communication of Government
policies and objectives for any divestiture;
- to develop criteria for the selection of enterprises
to be divested and assume responsibility for preparing such
enterprises for divestiture;
- to make appropriate consultations for successful processing
of all divestiture programmes, and
- to ensure consistency in procedures for divestiture,
in particular with regard to valuation, invitation for bids,
negotiation of sales and settlement of account.
The members of DIC comprise ministers of state and trade
unions, institutional and private sector representatives.
The day-to-day management of the divestiture program is undertaken
by a Secretariat, led by an Executive Secretary. The members
of DIC meet regularly to consider, among other things, specific
transactions negotiated by the Secretariat, submitting, as
applicable, recommendations to the President’s Office
for approval. DIC is assisted by specialised sub-committees
on mining, cocoa and coffee plantations and railway.
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| SOEs TO BE DIVESTED |
At the outset of the divestiture program, over 300 state-owned
enterprises (SOEs) were operating in all sectors of the economy.
Whilst a large number of them were in manufacturing and agriculture
(including cocoa and coffee plantations, poultry and fishing),
others were in the mining, hotel and timber sectors. Government
informs the DIC of particular SOEs that have been listed for
divestiture.
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| MODE OF DIVESTITURE |
Information and documentation are collected on each SOE listed
for divestiture. Once that has been done, decisions are made
as to whether it will be divested as a whole or fragmented for
the purposes of divestiture and the preferred mode of divestiture.
Fragmentation may be appropriate, for example, where the SOE
comprises a number of distinct businesses or divisions. The
mode of divestiture will usually be the sale to private sector
investors of the SOE’s assets by competitive tender.
However, other options include the sale of shares (particularly
where the SOE already has some private sector shareholders),
the entry by the state into a joint venture with private sector
investors (usually by transferring all or some of the SOE’s
business and assets to a newly formed vehicle, and the state
and investors taking equity stakes in that vehicle) and the
leasing to private sector investors of an SOE’s assets.
Where an SOE is moribund and no interest has been shown by investors,
liquidation is put in train.
It is Government’s policy, except in exceptional circumstance,
to terminate the contracts of employment between an SOE and
its employees with effect from completion of the divestiture.
The Government will indemnify investors against all costs associated
with termination (including, for example, severance payments
and end-of-service benefits) or otherwise arising out of the
employment of the employees during the period ending on the
termination. Termination permits investors to start with a clean
slate and, most importantly, to select own levels of staffing.
In addition, except where the mode of divestiture is the sale
of shares, Government usually assumes responsibility for the
discharge of the SOE’s liabilities. |
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