The latest “scandals” at the SBM constitute a serious warning to all those concerned. Would these at last provoke some positive reactions from our political leaders to reconsider the workings of our State Owned Enterprises?
“The SBM has been involved in what in the best of cases can be described as a process of “rash and neglectful” decision making leading to impairment of its assets to the tune of around Rs 5 Billion. This is yet another illustration of management failure which has become an all too regular feature of important government owned institutions. Such well publicized failings of government owned institutions add credence to the dominant neo-liberal ideology that the State should abandon its “interventionism” in the economy and leave the management of “commercial” activities to the private sector…”
What happened at the SBM over the past months is a matter of serious concern. The Bank has been involved in what in the best of cases can be described as a process of “rash and neglectful” decision making leading to impairment of its assets to the tune of around Rs 5 Billion. This is yet another illustration of management failure which has become an all too regular feature of important government owned institutions.
Such well publicized failings of government owned institutions add credence to the dominant neo-liberal ideology that the State should abandon its “interventionism” in the economy and leave the management of “commercial” activities to the private sector. Notwithstanding the fact that such argumentation is basically flawed since one can easily point to similar failures in large privately-run organizations and many publicly owned institutions have excellent records of profitability and growth, this remains the dominant narrative of most commentators.
It is extremely unfortunate that all too often the mismanagement and poor performance of state owned enterprises, where they occur, are directly attributable to the rash and irresponsible actions of our political leaders. They are in all such cases guilty of treating these institutions as their personal fief which they can fill with political appointees whose level of competence are rarely adequate for the jobs for which they are “nominated”. It is a real pity that they fail to appreciate that such reckless behaviour while politically expedient proves to be extremely harmful for the country in the medium- and long term.
The decision for setting up State-Owned Enterprises (SOE is a term used here to differentiate government owned institutions involved in competitive commercially driven activities from other forms of parastatal bodies) such as the SBM and the State Insurance Company (SICOM), to take these two examples from the financial sector, was not taken haphazardly or lightly. It was indeed a politically motivated decision taken after considerable deliberation and with a clear intent in mind.
The first such SOEs were set up in the 1970s – that is only a few years after the country achieved independence. Arguably what triggered the government’s decision and eventually the setting up of these SOEs would have been the paper published in 1974 by the then Economic Intelligence Unit led by a certain Mr Bheenick, who wrote the following among other things:
“The most interesting feature characterizing the patterns of shareholding of the big Mauritian companies is a tight and intricate interlocking of the companies. Not only are shares concentrated in the hands of some shareholders, but the same shareholders and groups of shareholders hold a great number of shares in several other companies…”
“such a complex concentration of shares and interlocking pattern of shareholding (and directorship) means that the effective control of the private sector of the Mauritian economy is retained in the hands of a very small group of shareholders and directors…”
“In sum economic power is concentrated. This concentration of economic power is accentuated by the recent process of merging in all the sectors — agriculture, finance, services and trade. And such a concentration of economic power naturally implies a concentration of revenue from various sources as well.”
And the paper concluded: “The point emerging from the foregoing is that concentration of economic power involves the possibility of monopolistic types of behaviour. And such behaviour is certainly typical of many sectors of the Mauritian economy.”
Confronted with such implacable arguments, the government of the day had little choice than to consider options for introducing some form of competition and diversity to the economic structure of the country. Among other options, including the eventual nationalization of industrial or commercial activities as was the trend in many newly independent African nations, the government opted for the setting up of State Owned Enterprises to achieve these goals.
Little has changed in the basic structure of ownership of existing large private companies since the days when the above were written. If anything, the concentration of economic power has increased and the phenomenal growth in the size of the economy over the past 50 years has amplified the phenomenon. The setting up of SOEs such as the SICOM, SBM, Mauritius Ports Authority and Mauritius Telecoms, Mauritius Duty Free Paradise, most of which have performed extremely well over the years have undoubtedly contributed to some form of diversification of economic activities and one dare say prevented some of the worst effects of concentration of economic power as witnessed in many other emerging nations. One can sensibly argue that these developments have been largely supportive of the model of harmonious socio-economic growth that has characterized the development of independent Mauritius up to now.
Persistent failure to uphold the integrity of the SOEs and irresponsible actions which lead to the undermining of their governance structures can therefore lead to the most perverse effects not only in the economic performance of these entities but can also potentially wreck one of the fundamental factors of socio-economic balance in the country. The latest “scandals” at the SBM constitute a serious warning to all those concerned. Would these at last provoke some positive reactions from our political leaders to reconsider the workings of our State Owned Enterprises?
* Published in print edition on 24 August 2018
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