Uganda Broadcasting Corporation (UBC), Uganda National Cultural Center, Uganda Electricity Distribution Company Ltd and Mandela National Stadium have been listed among 12 state enterprises that are no longer profitable.
The others are Uganda Air Cargo, Nakivubo War Memorial Stadium, Uganda Electricity Transmission Company Ltd, Uganda Railways Corporation, Uganda Energy Credit and Capitalization Company Ltd, and National Enterprise Corporation (NEC) Tractor Hire Scheme, NEC Tractor project and NEC Farm Katonga. The NEC enterprises are run by Uganda Peoples Defence Forces (UPDF).
The companies are listed in a document presented by the Ministry of Finance to the Finance Committee of Parliament this evening. The document availed by state minister for investment Evelynn Anite indicates that the state enterprises have had management and capitalization challenges affecting their performance over the years.
She however says government taking steps to strengthen governance of the listed institutions.
“This will include among others appointing strong Boards of Directors to give the requisite operational guidance to the enterprises. Government will also consider reviewing the management of those identified institutions.” reads part of the document.
The cause of the weak financial performance for Uganda Electricity Company Ltd. and Uganda Electricity Transmission Company Ltd. is however different since they are not structured to make profits but earn income to recover operational expenses.
It is noted that this negatively impacted the bottom line position of these companies especially given that the electricity companies by nature of their assets, have high depreciation costs.
“The electricity regulator approves the operational costs of these entities which are accommodated into the electricity tariff. Accordingly, to keep the tariff affordable, costs like depreciation were not allowed by the regulator as part of the recoverable costs yet there are operating costs that must be recognized in the financial statements of these entities,” the document notes.
According to a recent report by the Auditor General John Muwanga, out of 22 State Enterprises, only 10 are profitable and only one declared dividends to Government. The document availed by state minister for Investments Evelynn Anite indicates that New Vision was the only State enterprise that paid dividends.
Other enterprises identified as profitable include National Water and Sewerage Corporation (NWSC), Uganda Electricity Generation Company Ltd, National Housing and Construction Company Ltd, Uganda Posts Ltd, Nile Hotel Ltd (Serena Hotel), Uganda Wildlife Education Center, NEC Luwero Industries, NEC Construction Works and Engineering Ltd.
However, even after being identified as profitable, the finance ministry document indicates that a number of these have been identified as having high debt equity ratios and that retaining and capitalizing their profits would help improve their debt equity rations.
The Auditor General also notes that about seven enterprises have debt ratios of more than 50 percent implying that most of their assets are financed by debt.
Appearing before parliament’s finance committee earlier, finance ministry officials led by state minister for planning David Bahati were tasked to explain causes of the weak financial performance of the state enterprises. They were also required by the finance committee chairperson Henry Musasizi to highlight interventions that are being considered to address the poor performance of state enterprises.
In his response, state minister Bahati noted that he did not have an answer at hand but that his ministry had organized a meeting with Boards and Heads of State Enterprises this week to discuss the matter and later report to the committee.
However, MP Musasizi was hesitant to believe the minister’s response saying that the state enterprises are supposed to report to the finance ministry on a quarterly basis demanding that the previous quarterly reports should be provided to the committee since they indicate the performance of enterprises.
At this point, Bahati requested that his ministry avails the previous quarterly reports of state enterprises by end of Tuesday May 9.