State Enterprises Making Place For Private Business?

Editorial

The current predicament of the National Transport Corporation (NTC), a state-owned bus transportation company, might have sent yet another signal that public enterprises are bound to fail. This need not be so.

All of a sudden, several of the company’s buses had been found unfit for the roads this week and had to be withdrawn from circulation. The NTC’s remaining fleet was judged inadequate to provide public service to its entire existing network. The National Transport Authority decided therefore to allocate certain routes (presumably profitable ones) served exclusively by the NTC so far to other bus companies on a temporary basis until such time as the stock of NTC buses was replenished to capacity. NTC workers judged the situation with suspicion. They formed the opinion that the reallocation of routes to other bus companies was intended to run down the company eventually, in which case they felt that it was their jobs that were at stake. They therefore went on a lightning strike in protest on Wednesday last. As a result, numerous passengers were stranded on roadsides.

Since this incident came out in public, certain disquieting pieces of information have surfaced up. The first one of these is that quite some NTC buses are aged 16 years or more. It has been further stated that requests made to suppliers of the buses for spare parts were not met. This information is coming out in public against the backdrop of a grave road accident in which an NTC bus overturned along the motorway on March 30th killing 10 persons. It is not quite clear whether the buses with defective parts were simply put out of use or whether they were nevertheless put back on the roads patched up with whatever spare parts were obtained to keep them in precarious running condition.

But the fact is that this kind of situation could not have arisen all of a sudden. It must have been building up slowly, requiring management to renew the fleet as and when buses fell into disuse due to enduring mechanical problems. It has also been stated that the company has been incurring losses in past years and it did not consequently have the financial means to renew its fleet. Nor has it obtained the necessary funds from the Treasury as and when the need arose to order new buses in past years. The Minister responsible for the NTC has nevertheless stated that no jobs will be lost, that new buses will be imported within six months to add to the fleet and that, once this is done, the reallocated routes would be reverted to the NTC.

This kind of crisis management does not throw up a public sector enterprise like the NTC into favourable light. The question is whether, faced with such a situation, a private enterprise would have allowed it to fester until it had made sufficient profits to buy up replacement buses. The plain answer is that it would have gone straight to its bank which, based on its projected profitability plan once new buses were put in service, would have been too happy to lend money for the private enterprise to renew its fleet. However, if the bank came to the conclusion that the private enterprise would not be profitable enough to repay the loan requested for, it would turn down the request. In which case, the private company would have become subject to the capitalist law of “creative destruction” whereby the company would have gone under to be replaced by another one better adapted to the dynamics of the market place.

In a country such as ours, state enterprises have a distinct mission to be run on commercially sound lines. In addition, they are expected to serve the ‘public interest’ in a manner private enterprises run on purely profitable lines cannot. It must be reckoned that the absence of state enterprises in certain strategic areas of activity could eventually lead to the emergence of private monopolies on the hooks of ultra-liberalism to the detriment of the ‘public interest’. The state enterprise is thought to see horizons beyond squeezing up the last drop of profit from beleaguered customers: one of its objectives is to create sufficient space for social progress but not in the shape of our local misnomer, notably self-serving Corporate Social Responsibility.

What the current failure of the NTC and of several others belonging to the public domain is showing is that not all state enterprises embrace their missions with the amount of commitment and forward-looking substance – building as they were originally conceived for. Quite a few of them end up promoting the careers of misfits put in charge of running them; others have vision-less boards to preside over their destiny dealing in the abstract and far removed from ground realities and the changing market dynamics. Not surprisingly, they can’t even identify what needs to be done in consequence until it is even too late to do the repairs. The problem is that when a state enterprise goes under due to these sorts of inefficiencies, people tend to pass judgement over the inevitability of all the rest among the state enterprises being condemned to identical fates. This is not true.

The real flaw does not pertain to the enterprise being in the public domain. On the contrary, such an enterprise can aspire to have more sturdy support in times of difficulty and longer life than those which fail according to the vagaries of the markets. The flaw lies in the men who run them imperfectly and in the Ministries which are busy counting the beans instead of putting on glasses which give them a more vivid long-term vision. This is how the whole idea of the public enterprise gets wilfully or intently defeated to make place for private business.

* Published in print edition on 28 June 2013