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September 18, 2020

BY Andrew Keili

SALCAB SAGA: I SUPPORT UNBUNDLING—-OF THE FACTS!

The President stated thus in his 2019 speech to Parliament, which devoted three quarters of the Information and communications section to SALCAB:

“I am now pleased to report that in less than a year, SALCAB made a net profit of Le 10 billion, re-calibrated the business model to offer a value proposition that reduced the price of wholesale data by 48%, increased data utilization/uptake by 100% from a monthly average of 8G to 16G, and increased monthly revenue by 32%…………The current management team has reduced operating expense by 37% through strategic cost savings initiatives; they have attracted the right skill set that gave them the leverage to terminate a contract agreement with an International Commercial Consultancy Firm, which saved the business over US$ 41,000 monthly.”

Wow. What a team! How commendable!

But hold your horses! This is quite at variance with observations of the recent happenings in Parliament, resulting in the resignation of the Chairman of the Transparency and Accountability Committee, Hon. Tawa Conteh and the apparent resignation of the other cross-party members, which would give the impression SALCAB was an Institution in crisis. Even those who have no dog in the SALCAB fight would be excused for having the impression the Ministry and SALCAB have had different notions about how the institution should be run. Unsubstantiated accusations of impropriety on the side of the Minister, SALCAB MD, Hon. Tawa Conteh, the Leadership of Parliament have surfaced left, right and center in the media and battle lines have been clearly drawn. I will “chicken out” of this battle.

The long and short of it is that the unbundling recommended by the Ministry and adopted by Cabinet which will see the National Fibre Optic Asset comprising the submarine cable and the National Terrestrial Backbone manned by SALCAB operate as two separate entities does not quite hold water with the Committee, which would like the Ministry to shed more light on the rationale for this profound change. To make things more confusing, it would appear that SALCAB which has not quite embraced the Ministry’s plans for unbundling actually had a partial privatisation plan of its own, which was thwarted by the Ministry after going through NPAA.

The arguments left one with the impression that many people do not realise that privatisation can take many forms ranging from privatisation of small sections of operations, to simple management contracts to full-fledged sale of the enterprise. Secondly it will be prudent before jumping into any privatisation exercise to do a full analysis of the options- this is usually interdisciplinary and takes time. A cursory review of some of these issues and the performance of privatised utilities may yield valuable results.

The NCP’s divestiture plan in 2003 best exemplifies the many forms of divestiture considered at

that time:

  • The sale of the business to a private sector investor or investors or the sale of the assets of the business in part or as a whole;
    • Joint venture of the State with a private sector investor;
    • Management contracts with a single company or consortium of companies, of all or part of the public enterprise;
    • Performance contracts;
    • Liquidation of the public enterprise;
    • Sale to other shareholders in the company where Government owns part of the shares;
    • Leases, in the case of hotels;
    • Employee or management buyouts so as to broaden local participation in the process.

In the telecoms sector, we have witnessed how Sierratel has struggled with its privatisation over the past decade to the extent that the new MD mentioned this week that the company will for forced to shut down operations if government does not come to its aid. Sierratel is heavily indebted to several external financial institutions (guaranteed by the Government) for its modernisation and expansion programmes. This was supposed to be predicated on a restructuring of the sector and privatisation of certain services. Undue political meddling has messed up the restructuring exercise over the years and repayment of these loans may be in jeopardy.

But when we talk about unbundling, perhaps the more recent unbundling of the electricity sector provides the best reference point. The rationale for the sector reform, which ended up being based on unbundling was that NPA was facing a capital crisis (no funds to fund its capital expenditure), performance crisis (the performance of management left a lot to be desired), an access crisis (less than 10% of Sierra Leoneans had access to electricity) and the cost burden to government (NPA was being highly subsidized).

Fast forward to now. Without casting any aspersions on EGTC, EDSA and SLEWRC, whose performances are hampered by many factors- some not of their own making, many of the problems before unbundling still persist. Simply put, we are at a stage whereby the more EDSA distributes power (which is good for the populace), the more government bleeds in subsidizing the sector. The Finance Minister’s 2019 budget speech best exemplifies this conundrum:

“State-Owned Enterprises continue to pose significant risk to the Budget. There are issues of poor financial performance, weak governance, inadequate investment and substantial arrears. The estimated liabilities as at end 2018, is approximately Le1.5 trillion. Between January and September 2019, the Government provided Le98.7 billion as subsidy to the Electricity Distribution and Supply Authority (EDSA) to ensure the sustainable supply of electricity. Should the current trend continue, EDSA would require about Le311 billion in subsidies for the 2020 fiscal year due to technical and non-technical losses. This is clearly not fiscally sustainable…….. Government is allocating an amount of Le127.5 billion from the recurrent budget to the Ministry of Energy. Of this amount, energy subsidies including fuel for Independent Power Providers, is Le124.1 billion.

Now that I have set the scene, let me state quite clearly that there are ample reasons why the Ministry of Information should not only level with the Transparency and Accountability committee and other relevant committees of Parliament but with Joe Public. It really does not matter whether the matter has gone through Cabinet. Parliament has a responsibility to vet these decisions and Ministers and heads of MDAs being called by Parliament have a responsibility to unbundle the facts to give assurance that they are adopting the best line of action. Issues of profound changes in the governance architecture should especially be thoroughly thought through before being presented and should never be thought of as a fait accompli.

I am particularly heartened by a statement attributed to the Minister of Information when he says:

“To realise the unbundling project, a cabinet committee comprising Ministry of Finance, Office of the Attorney-General, the Public Private Partnership Unit and the Ministry of Information and Communication has been set up to work out the technical details.”.

As a representative of Joe public, I would like to ask the Minister primarily and others in this fight some fundamental questions, some of which may be very fundamental and others probably already addressed:

  1. What is the composition of the group that did the rationalization of the best way to manage the entire SALCAB entity? Is there a report available on this and was it made available to Parliament? What is the main reason for the choice of the divestiture mode adopted?
  2. What is the Ministry’s assessment of SALCAB’s current financial performance and what is it based on? What is SALCAB’s indebtedness to external parties and local financial institutions. How much is owed to SACAB by government? Has there been a performance audit done of SALCAB?
  3. Is the SALCAB BOARD being allowed to do its proper job of corporate governance? What is the Ministry’s opinion of their stewardship?
  4. How much undue interference is there (if any) by government in the operation of SALCAB?
  5. What is the Ministry’s assessment of SALCAB management’s performance and what is the basis for this assessment?
  6. Does the performance of SALCAB management (perceived or measured) have a bearing on the privatization decision? If poor performance is a factor (perceived or actual), is the suggested solution not merely “kicking the can down the road”?
  7. Have there been any reviews done by government of the persistent failures of our privatized State owned enterprises? If so, by whom and what are the results? Can we get any “lessons learnt “ from these?

The answers are merely what I believe should be readily in the Ministry’s arsenal as it attempts to chart a way forward for SALCAB.  Prior consultations with lawmakers could have probably helped before this “showdown at the o,k corral” in Parliament. But it is never too late. Public servants, including Ministers should know they should be accountable and should not get peeved when asked to answer to questions- even ones that may be viewed by them as silly.

This reminds me of a good friend of mine at Rutile who gave instructions to a boat operator to tow six heavy dredge bucket pins, each costing two thousand dollars to the shore using a single pontoon. “Na two pontoon we kin join Sir for mek e nor tornobo”, the illiterate boat operator advised. My friend, visibly angry instructed him- “You obviously know nothing about Archimedes principle-a floating body displaces each own weight of liquid in which it floats”. “A nor sabi da man day Sir but me day tell you say e go tornobo sir”, the boat operator answered. Long story short, the single pontoon ”tornobored” and six pins went to the bottom of the murky pond-never to be retrieved. “Oh my God, I forgot about the principle of toppling”, my friend exclaimed. He was nearly sacked.

The moral of the story- This is not Archimedes Principle! Joe Public and Parliament deserve to know the rationale for decisions. It should never be considered too complex to explain.

Yes, I support unbundling-of the facts!

Ponder my thoughts