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Government urged to address poor financial performance of state enterprises
Uganda Railways Corporation is one of the six government entities whose debt ratios exceed 50% of their total budgets. PHOTO/COURTESY
What you need to know:
The report highlights six government entities—Uganda Electricity Generation Company, National Enterprise Corporation Construction Works & Engineering Limited, Uganda Electricity Distribution Company, National Water and Sewerage Corporation, Uganda Electricity Transmission Company, and NEC Uzima Limited—whose debt ratios exceed 50% of their total budgets
Economists and civil society organizations are urging the government to implement rigorous monitoring of the financial performance of its state-owned enterprises. This comes in response to the 2023 Auditor General's report, which reveals that several government-owned enterprises are contributing to the country’s debt burden, with many operating under significant debt.
The report highlights six government entities—Uganda Electricity Generation Company, National Enterprise Corporation Construction Works & Engineering Limited, Uganda Electricity Distribution Company, National Water and Sewerage Corporation, Uganda Electricity Transmission Company, and NEC Uzima Limited—whose debt ratios exceed 50% of their total budgets.
The report also notes that several state enterprises and corporations, including Uganda Electricity Distribution Company Limited (UEDCL), Uganda Printing and Publishing Corporation, New Vision, Uganda Air Cargo Corporation, Uganda Railways Corporation, and Uganda National Airlines Company, have seen an increase in losses. This trend, the report warns, could jeopardize these entities' ability to meet future obligations or make necessary investments.
Dr Fred Muhumuza, an economist and lecturer at Makerere University, emphasized the need for accountability. He stated, “Public enterprises should be held accountable, and disciplinary action should be taken against management if they fail to comply with government directives. We cannot allow this to become a culture. Management should be reprimanded and dismissed if they continue to underperform.”
Economist Richard Sempala added that while state enterprises are established to meet objectives such as profit generation, controlling private sector monopolies, implementing government policies, and providing services to citizens, they must adapt to changing business environments. “State enterprises need to be innovative to attract customers. They should be given targets that are closely monitored,” Sempala said.
Enock Nyorekwa Twinoburyo, a senior economist and consultant with the Sustainable Development Goals Center for Africa, based in Kigali, warned that the underperformance of public corporations and state enterprises poses a fiscal burden on the national budget. “If these entities continue to receive government funding without accountability, it’s illegal. The government should consider halting their funding until their performance is properly evaluated,” Twinoburyo suggested.
Julius Mukunda, Executive Director of the Civil Society Budget Advocacy Group, stressed the importance of efficiency in state enterprises to avoid exacerbating the country’s debt burden. “We need to strengthen public enterprises and state corporations by regulating their activities. This includes implementing clear guidelines, such as changing management every two years, and tackling corruption, which significantly hampers their performance,” Mukunda said.
Jennice Ishimimaana, Communications Officer at Uganda Debt Network, attributed the escalating debt to persistent budget deficits, private sector borrowing, and declining revenues. “Uganda's debt-to-GDP ratio is projected to reach 53% in 2023/24, surpassing the IMF's 50% threshold for low-income countries. Addressing budget deficits, improving debt management, and enhancing revenue collection will be crucial to curbing the growing debt burden,” Ishimimaana noted.
