Cabinet has directed that the loss-making Roads Contractor Company (RCC) be placed under legal judicial management, Public Enterprises Minister, Leon Jooste, announced on Thursday.
He said that in considering plans to re-finance and re-organize the company to meet its obligations, the major roadblock was that the RCC has bonded most of its fixed assets, making it difficult for the company to quickly manoeuvre itself out of its current financial quagmire by liquidating some of its property.
On top of bonding most of its assets, Cabinet also rejected a proposed turnaround strategy as non-viable.
“We could not use the balance sheet, most of the assets are bonded, and there is little room to manoeuvre,” Jooste said.
The RCC has become the first State-owned Enterprise (SOE) to be placed under judicial management.
The roads SOE last produced its financial statements in 2008 contrary to the law requiring financial reports to be tabled annually in Parliament.
The available reports indicate that the RCC has made loses since 2000 when it was established and currently, the value of its liabilities exceeds the value of its assets. Jooste refused to confirm these figures or disclose updated statistics, saying they will only be revealed once the matter is in court.
Some of the company’s fixed assets include its head office in Windhoek, prime real estate in central Windhoek and land and offices in other parts of Namibia.
Cabinet deliberated over several options concerning the future of the RCC and decided that judicial management was the best option.
“We are not comfortable with 393 people on the streets immediately,” Jooste said. The salary bill at the RCC is N$7 million per month, Jooste said.
The employees will be paid directly from treasury until the review is concluded. However, it is unclear what work will be done in exchange for these State-funded salaries.
He said the Government as the shareholder does not expect the RCC board to oppose its plans.
The RCC is the first SOE to face this level of intervention in its poorly managed financial affairs. This step is indicative of the Government’s firm stance that commercial SOEs must become financially viable, break even or close down.
Jooste said the Government has studied successful SOEs operating in other countries. However, the minister admitted that the Government’s plan to turn around loss-making SOEs will not be easy or expeditious.
“This will take time, this is a journey. SOEs employ about 16,000 people and it will take time to change the current mind-set of people working there and those managing them,” Jooste said.
The casual attitude of expectation of annual Government ‘bailouts’ has lessened the intensity of the need for many of those earning their livings from SOEs to run these companies efficiently and commercially.
He said that given the seriousness of the current financial situation at the RCC and limited availability of State resources to assist ailing commercial public enterprises, the Cabinet Committee on Overall Policy and Priorities (CCOPP), which is chaired by President Hage Geingob, decided on Wednesday that judicial management of the beleaguered SOE was unavoidable.
The RCC Act requires parliamentary endorsement of the Cabinet’s decision to place RCC under judicial management or liquidation.
“Therefore approval will be firstly sought from Parliament and thereafter the Master of the High Court will be approached to sanction the judicial management,” he said.
Jooste said the RCC has many creditors who will have to wait for their claims against the company to be settled. Judicial management will stave off precipitous legal action that could further jeopardize the assets of the company.
“The judicial manager will pro-actively seek ways to restructure the debt and respond to the financial demands of the company,” concluded the PE minister.