MTC Sale a Good Test

WHAT A pity the government is selling nearly half its shareholding in Mobile Telecommunications Ltd (MTC) because the state is broke and not as a matter of principle.

For the record, the move was long overdue. The N$3,1billion the state expects to make from the 49% share sale will pay for debts and the deficit Namibia is stuck with.

We won’t know whether the state could have gotten a better deal had it not been under pressure. But it’s fair to argue that the absence of clear laws and policy on the role of the government in operating private-sector businesses has rather destroyed value for the ultimate shareholders, the citizens of Namibia.

Apart from a few examples, most government-run institutions have been a burden on taxpayers, and that includes even ones in industries that have operated in hugely profitable sectors of the economy.

MTC, Namdeb (and Namdia) and NamPower are among rare examples. A major factor that makes these few stand out is private sector management or business culture with a hands-off approach by the shareholder representatives, a euphemism for politicians and bureaucrats.

MTC began as a joint venture with Swedish private companies. That helped set a tone and culture to operate in a hugely profitable manner.

The state actually made a fortune of about N$1 billion after selling 34% of its stake to Portugal Telecom in 2006. A few years ago, the government bought those shares back for about N$3 billion.

Time value of money experts would probably show that the N$3 billion the state hopes to gain now for 49% of the shares represents a massive discount to the benefit of buyers.

But that’s besides the point of this editorial.

The listing of MTC on the Namibian Stock Exchange is worth watching closely in the context of demands politicians and their business cronies keep making on private business owners.

They complain about wealth inequality inheritedfrom the colonial/apartheid era – that companies have exploited workers only to enrich their owners.

They demand the empowerment of black citizens by the ‘previously advantaged’.

Very few would argue against sentiments to ensure the majority of citizens are active in national economic activities. The reality is that the ruling class and their cronies keep enriching themselves at the expense of the majority of the Namibian population.

In addition to public works tenders, state-owned companies are schemes of jobs-for-comrades who often disregard business principles with overpaid boards of directors and managers. Many parastatals have relied heavily on taxpayer bailouts to remain in business. No one is ever held to account.

Example: The state-owned Roads Contractor Company (RCC) has ceased operating for about a decade, yet its employees remain on the government’s payroll. The company reportedly owes its creditors N$600 million.

The RCC collapsed while several of its managers were competing against it for road construction.

With honest directors and managers operating on business principles, the RCC might have become as successful as MTC.

The listing of MTC is thus a lesson to government politicians to stay out of running enterprises.

The government should stick to its role as an enabler for businesses to thrive. It is perfectly acceptable that the government invests in the private sector as a catalyst in growing an industry.

It is also understandable when state entities go into business to provide for basic social services that the private sector would not do.

But the government should not supplant or compete against the citizens’ private endeavour which spurs innovation and wealth creation.

And if serious about empowering black Namibians, especially the currently disadvantaged many, the government could use the MTC example by supporting (through funding mechanisms and not free enrichment at the expense of the public) employees/people to become shareholders.

Most importantly, the state must exit the private sector as soon as reasonable objectives are accomplished, and allow citizens to engage in commerce. After all, the government has the important role of an impartial referee.

The state can only play that role successfully when clear policies and regulations are in place to ensure politicians and bureaucrats do not become conflicted as players and referees.