New draft law seeks to make public enterprises financially independent

There is need for commercial-oriented parastatals to be self-sustaining financially to ease the burden on the national treasury, Members of Parliament said on Wednesday as Government moves to revise the 2009 general provisions governing public institutions.
Some of the ONATRACOM buses that broke down and are parked in Nyamirambo. ONTRACOM  is one of the commercial public institutions. (Timothy Kisambira)
Some of the ONATRACOM buses that broke down and are parked in Nyamirambo. ONTRACOM is one of the commercial public institutions. (Timothy Kisambira)

There is need for commercial-oriented parastatals to be self-sustaining financially to ease the burden on the national treasury, Members of Parliament said on Wednesday as Government moves to revise the 2009 general provisions governing public institutions.

The lawmakers were debating amendments on the piece of legislation that seeks to ensure optimum profitability of public enterprises and accountability through performance contracts.

The draft law establishing general provisions governing public institutions was initiated by the Ministry of Labour and Public Service.

The lawmakers endorsed the draft legislation on Wednesday.

However, contentious clauses in the law evolved around maturity period (mid-term), which is the period before enterprises can start registering profits, pay dividends as well as types of taxes that need to be remitted to the revenue collector.

Mid-term periods refer to the period when the Government still allocates a budget and conducts regular consultations to run a public institution business.

MP Immaculee Constance Mukayuhi said the law should be clear on what it called mid-term financial and administrative assistance by the government to commercial public institutions, especially those making losses and are heavily indebted.

“Government consultations and mid-term periods should be well-defined and should take into account the institution’s financial capacity. We have seen a lot of abuses in the past and the Government cannot continue to waste public funds because of reckless managers; so this particular law needs to minimise such losses,” she said.

Mukayuhi argued that commercial-oriented parastatals should be given a timeframe to make profits and become autonomous if government is to invest in other lucrative activities.

The latest Auditor General’s report faulted some government institutions over poor leadership, coordination, incompetence and failure on corporate governance, leading to mismanagement of public funds.

Other than the National Post Office and a few other public enterprises which managed to make zero net profits, some institutions such as former Energy, Water and Sanitation Authority (EWSA), Rwanda Broadcasting Agency (Orinfor), and ONATRACOM, have all plunged into losses and were heavily indebted, according to the report.

Responding to the concerns, Juvenal Nkusi, the chairman of the standing committee in charge of public funds which scrutinised the law, said mid-term period for maturity and consultations with government does not erase the institutions’ core responsibilities to make profits.

“Commercial public enterprises follow monitoring and evaluation principles which need to be observed fully and these are supplemented by performance contracts. It is not a matter of excuses, where officials will come and say that they have tried but failed to make profits,” he said, alluding to the fact that the law was designed to help institutions make more profits for sustainable development.

Judith Uwizeye, the Minister of Labour and Public Service, explained that the medium period for budget support and government consultations can be stopped within a certain period depending on different aspects.

“The mid-term aspect means the period when the government still invests in the institutions to carry out their mandate. However, consultations are a must despite flexibility to run their businesses autonomously,” she said.

“Time will come when the Government will cease to invest in the institutions and let them run without our consultations.”

According to the law, in discharging its responsibilities, every commercial public institution shall take the necessary steps to ensure that, each year, its revenues are sufficient to sustain its budget with balance reimbursed to the national treasury.

The law that now awaits tabling before the Senate categorises public institutions into commercial and non-commercial enterprises.

Article 25 of the draft law states that every commercial public institution shall prepare its annual budget relating to its activities and submit it to the organs in charge of approving the national budget.

“The annual budget shall indicate the annual financial statements of the previous financial year as well as the proposal of the business plan for the following financial year for approval,” reads part of the law.

editorial@newtimes.co.rw

 

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